As published in Business News on 29 August, 2022.

Perth’s leading property experts believe astute investors are sitting on a golden opportunity, as the State grapples with a rental crisis that shows no signs of slowing down.

With a combined 60 years’ experience in property development, Adrian Johnson, Quentin Lau and Ewan McConnell of Summit Developments, said WA is in urgent need of more investors to help ease the housing shortage the state is facing.

“We are in the midst of a housing availability crisis, with less than 2,250 properties currently available for rent, Adrian said.

“This equates to just one percent of all properties available to rent in the WA market – a historical low level. In a stable, equal market – the number of rental properties available should sit around 7,500.

“And with limited stock, we’ve seen rents increase by 6.7 per cent in the past 12 months which will continue to rise as Perth struggles with high demand and limited supply.”

WA is already facing a housing shortfall, with an extra 8,000 homes already needed to end the rental crisis. On top of that, the Real Estate Institute of WA said the State needs to build 19,500 homes a year to keep up with population growth and new demolitions.

“At present, the WA residential building industry is only building 16,500 homes a year – which will result in a housing shortfall for the foreseeable future as the industry tries to play catch-up.”

Quentin Lau continued by saying investors who already own land and are ready to start understanding their capacity to subdivide and move forward with adding value to their property, are in a great position.

“Property is not a speculated, short-term investment, it’s a long-term, stable growth strategy and investors have the potential to maximise their potentials and make the most of historic low vacancy rates.

“Many people have trepidation about building and investing in today’s market, with interest rates and inflation figures rising, but as I remind my clients, we know inflation is going to be high so as long as interest rates are lower than the inflation rate, you’re still going to be in front.

“And the bigger picture is that Perth is still undervalued and other markets are starting to muscle in.

“This is why we strongly encourage our clients to consider a ‘Build to Rent’ strategy, as you have the benefits of tax deductions, deprecation, compounding capital growth and rental income that could be paying off your repayments.”

Ewan McConnell said he’s seeing many investors who own land continuing down the ‘Build and Flip’ strategy which he says presents owners with a missed opportunity to gain maximum rental yields in today’s market.

“Investors need to look at a change of investment direction and think outside the box. What worked two years ago – isn’t necessarily the ideal strategy today.

“By building, holding and renting for a minimum of 12 months, you’re not only going to give yourself at least a 50 percent reduction in capital gains tax, but the opportunity to reduce tax by claiming deprecation on your assets.

“And with population expected to increase by an additional 150,000 people over the next four years and our strong local economic performance tipped to rise, there’s never been a better time than now to look into a ‘Build to Rent’ strategy.

So why is now the right time to invest in a ‘Build to Rent’ strategy?

  1. Less volatility – Property can be less volatile and more stable compared to other investments such as shares or crypto currency.
  2. Tax deductions – You can offset most property expenses against rental income, including interest on any loan used to buy the property.
  3. Income – If you decide to rent your investment property, you could earn a rental income if the property is tenanted and have a positive cash flow.
  4. Capital growth – If your property increases in value, you will benefit from a capital gain when you sell.
  5. Affordability – Perth has the lowest median property price of any State capital combined with the highest median income.
  6. Vacancy rates – Only 1% of properties in Perth are currently vacant, down from 1.4% a year ago.
  7. Interest rates – Regardless of rate increases, interest rates in Australia remain at historically low levels.
  8. Population growth – Perth’s population currently sits at just over 2 million and is expected to increase to 2.5 million people in 2030, 2.9 million in 2040 and almost 3.4 million by 2050.

Summit Homes are Perth’s leading home builders and property developers. Speak to our team of experienced development specialists who will be able to help guide you in the right direction. And if feasible, create a structured property development plan for you.

Get in touch with Adrian, Quentin or Ewan who can help get you started on your development journey.