Head west for the best investment
Stronger yields and a lower entry point make Perth an attractive option for property investors
2 min
Investors after higher yields and a more affordable entry market should look to Perth, a leading property analyst said.
Director of research at CoreLogic, Tim Lawless said Perth has the highest gross rental yields of all the capital cities, while also having a lower position of investment activity, making it one of the best opportunities in Australia right now.
“Additionally, the entry point to the market is more achievable, with Perth home values recording the lowest median dwelling value of the state capitals and prices are proving to be pretty resilient through the rate hiking cycle so far, in fact Perth is the only capital city where housing values have recovered to a new record high,” Mr Lawless said.
He said the lack of interest in investing in Perth was puzzling, although the variations in the mining industry could be a factor.
“It’s hard to explain why investors seem to be less attracted to the Perth market,” Mr Lawless said. “Perhaps there is a level of herd mentality playing out, where more investment is flowing into the Sydney or NSW market despite the unaffordability and low rental yields.
“Another reason why investor demand is weak may relate to the significant volatility in Western Australian housing values during and after the mining boom.”
Prices in the Perth market surged in the decade after 2004 and then fell 20 percent between 2014 and 2019.
While capital gains were greater historically in the eastern states, the entry point in Sydney and Melbourne was also much higher, requiring higher levels of borrowing for many would-be investors.
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Excluding the Covid-19 pandemic period, annual growth was the lowest since 1992
2 min
Australia’s commodity-rich economy recorded its weakest growth momentum since the early 1990s in the second quarter, as consumers and businesses continued to feel the impact of high interest rates, with little expectation of a reprieve from the Reserve Bank of Australia in the near term.
The economy grew 0.2% in the second quarter from the first, with annual growth running at 1.0%, the Australian Bureau of Statistics said Wednesday. The results were in line with market expectations.
It was the 11th consecutive quarter of growth, although the economy slowed sharply over the year to June 30, the ABS said.
Excluding the Covid-19 pandemic period, annual growth was the lowest since 1992, the year that included a gradual recovery from a recession in 1991.
The economy remained in a deep per capita recession, with gross domestic product per capita falling 0.4% from the previous quarter, a sixth consecutive quarterly fall, the ABS said.
A big area of weakness in the economy was household spending, which fell 0.2% from the first quarter, detracting 0.1 percentage point from GDP growth.
On a yearly basis, consumption growth came in at just 0.5% in the second quarter, well below the 1.1% figure the RBA had expected, and was broad-based.
The soft growth report comes as the RBA continues to warn that inflation remains stubbornly high, ruling out near-term interest-rate cuts.
RBA Gov. Michele Bullock said last month that near-term rate cuts aren’t being considered.
Money markets have priced in a cut at the end of this year, while most economists expect that the RBA will stand pat until early 2025.
Treasurer Jim Chalmers has warned this week that high interest rates are “smashing the economy.”
Still, with income tax cuts delivered at the start of July, there are some expectations that consumers will be in a better position to spend in the third quarter, reviving the economy to some degree.
“Output has now grown at 0.2% for three consecutive quarters now. That leaves little doubt that the economy is growing well below potential,” said Abhijit Surya, economist at Capital Economics.
“But if activity does continue to disappoint, the RBA could well cut interest rates sooner,” Surya added.
Government spending rose 1.4% over the quarter, due in part to strength in social-benefits programs for health services, the ABS said.
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