Discounts of 40% on offer in WA's luxury coastal market
The raging Australian dollar pushing tourists offshore, a massive oversupply of housing and a contracting wine industry have combined to create an investment desert that runs from Mandurah, 70km south of Perth, through to Esperance near the Great Australian Bight.
Valuer Michael Valetta, director CBRE Perth, says residential prices throughout the south-west are very soft and will stay that way for years.
“The low prices may attract investors to places such as Mandurah, but they will not see much capital growth for years, with this trend most evident in the higher priced oceanfront and canal properties. An oversupply of land also exists in the Dawesville and Wannanup areas, with values very subdued as a result,” Mr Valetta said.
The prestigious Oceanique luxury apartment building at Dawesville, developed by Port Bouvard, is a prime example of a troubled market. The company has settled about $60 million worth of sales, across 25 deals, in the 66-unit, two tower, award-winning project.
“We had hoped to have all of the apartments sold by early 2012 but we are averaging one sale a month,” says Port Bouvard managing director Stephen Court.
Of the 25 sales, 19 relate to presales and six are deals secured since December when the company discounted some units by 40%.
“Late last year we decided we had to be savage with price cutting to stimulate interest and it brought several sales to the table and renewed interest,” Mr Court says.
Now prices are steady at 25% off original projections set in 2007. “We started marketing Oceanique in 2007 when the market was blasting along, so we were hit hard by the GFC.”
The company is pursuing some sales made off-the-plan through the Supreme Court.
About half of the 15 pre-sales are currently in mediation as part of the judicial process while, the balance is in ’sensible negotiations’ with the developer.
“Some people were ruined by the GFC and we are not interested in that type of business but we will go all the way to settle deals that were done,” he says.
Port Bouvard originally had a facility with St George Bank for $101 million for Oceanique, which had a completion value of $167 million. By June this year the company had paid $58 million.
Despite the rocky conditions, Oceanique has secured some impressive sales, with two penthouses selling to a Perth-based mining millionaire for $7 million to be used as a weekend retreat. Two other apartments sold for more than $5 million each and only two of the 25 settlements are for less than $1 million.
The project is considered one of WA’s finest, having won the Master Builders Western Australia Excellence in Construction for 2011 – (best multi-unit development). It also received a commendation from the Royal Australian Institute of Architects WA chapter’s 2011 awards for residential architecture.
However, further south, residential prices in WA’s beautiful south-west, where such iconic names as Margaret River, Dunsborough and Eagle Bay proliferate, are believed to have hit rock bottom.
“Prices have plummeted in this region over the past few years by as much as 20 to 30% from their peak in 2007 and the GFC ended any hope on improvement,” Mr Valetta said.
CBRE’s south-west senior valuer Justin Anderson says the Margaret River to Augusta region has taken a hammering.
“Yields are just terrible in the south-west. Residential property is lucky to see 2.5% to a maximum of 3.5%. Traditionally investors in this market have looked for capital growth rather than strong yields, but growth has dropped by as much as 50% in some areas.
“Cashed up people from Perth and the eastern states bough their south-west houses as toys and when the GFC hit, the first things to be sold where the toys,“ he says, adding that houses previously valued at $4 million in Eagle Bay were listed for $2.5 million.
There is little industry in the area to support residential investment and viticulture is contracting as demand shrinks. “In the marginal wine areas such as Nanup and Bridgetown people are pulling up their wines because there are no buyers out there and the strong Aussie dollar is pulling tourists offshore,” he said.
A recent report from CBRE also points to exceptionally soft conditions in Bunbury and Busselton, with few sales made and an oversupply of improved and vacant land.
