Esperance investment market more incidental than dedicated: HTW
The residential investment market appears to be more incidental than dedicated, was how valuation firm Herron Todd White described the Perth suburb Esperance.
Its month in review suggested that typical investors vary from goldfields based owners having their coastal getaway to local people upsizing and being able to retain their current property to generate some rental income.
It went on to add that local farmers also have town properties for either their own use or as an off farm investment.
As with most areas, returns also vary with the higher returns associated with higher risk.
"At the lower end of the residential market, Nulsen is hard to go past as a starting point for entry level homes providing affordable housing and higher returns on investment.
"For less than $200,000 a fairly comfortable home can be picked up with loan payments generally less than rent and at least there is a starting point for property ownership.
"From an investment perspective, the home you can purchase under $200,000 could generate $250 to $280 per week in rental income which gives a far better return than the next market level that would see you outlay around $100,000 more for probably only $20 to $30 per week extra in rent."
The HTW report offered the reason the area is so cheap and in fact is probably the most affordable housing in the region, is the history of state housing and some antisocial behaviour. However, primary and high schools are within walking distance as are neighbourhood shopping facilities.
"The Esperance town centre provides regional shopping and health and recreational services are less than three kilometres away at the furthest point.
"This area struggled for sales during 2011 and 2012 with a turnaround in volume and values in the latter part of 2013 and into 2014. 2015 has seen strong demand as the realisation creeps into the market that this is a very affordable area."
The review said that on a percentage basis, Nulsen is likely to provide the best growth for property at the lower end of the broader market.
"At the next level, Sinclair and the older areas of Castletown have a variety of property for the purchaser in the high $200,000s into the early $300,000s price bracket.
"The homes are generally reasonable brick and tile about 25 to 35 years old on average and at the point where renovations would lift them to the next level. For the investor, potential rental levels are at the $280 to $320 per week level."
It went on to add that the next level up again is the better quality homes within Castletown and West Beach.
"Typically, these properties are selling between $400,000 and $550,000 and in the current market are returning rentals between $400 and $500 per week.
"From an investor’s perspective, while the percentage return is down compared to the lower valued areas, the potential for a better quality tenant and a property likely to have less maintenance issues combined with stable longer term capital growth is appealing."
