The Perth property market is experiencing steady growth this year, despite steadily increasing interest rates. This has been at least in part due to the steady influx of high net worth individuals into the area. The area is now also seeing steady development as a funds management hub as more and more wealth management firms set up business in the area, hinting at more than just a casual relationship between the two.
Millionaires rows built along South-west Australia’s Golden Triangle
The aptly named golden triangle of South-West Australia is now at the epicentre for the boom in the property market caused by high networth individuals moving into the area. The term golden triangle refers to the area enclosed by Dunsborough, Margaret River, and Busselton. The area is estimated to have attracted over $100 million in development funds over the past six months alone. Residential real-estate is seeing the largest growth, resulting in the contraction of development properties: 10 or more coastal towns overlooking the coast now have a millionaires row of luxury real-estate properties. According to the Financial Review Rich List in 2022, 18 billionaires make Western Australia their home, which is equal to close to 20% of the total wealth tracked.
The wealthy residents have also made their residential areas their homes by setting up family offices close to where they live. These include the offices of gaming billionaire’s Laurence Escalante’s offices, the offices of Malaysian-born property developer Chiu Chi Wen, and Tim Roberts of the Warburton Group.
Fund management firms follow wealthy residents into Perth
Katana Asset Management is a fund management firm that has been based in Perth’s central business district for 19 years. However, the concentration of wealthy individuals in Cottesloe has led to the firm to move its offices to the area, effectively increasing the firm’s access to their target demographic. Endeavor Asset Management is another fund management company to move into the area: it also oversees $300 million in investor funds.
This convergence of wealthy individuals and wealth management firms have resulted in the development of a professional network of wealth management in the area. This is also perhaps why most of the development in the region is financed by local investors. High net worth families and individuals such as the Prindiville family, Russel Hawkins, and Ron Clarke have stakes in property development in Perth.
The attractions of the coastal region
The local charms of the coastal towns play a significant role in attracting wealthy residents looking to settle down into the area as well. The rolling rich landscapes, the allure of the vineyards, and the rocky seaside all offer a picturesque setting for the perfect dream home. The beach also offers unlimited access to one of Australia’s favourite past times: surfing, the conditions for which can vary between the best and the worst in the world. In fact, some of the area’s notable residents include surfing stars turned business people, such as Mitch Thorson who ranked seventh in the world circuit between 1983 and 1993 and Holly Monkman, champion of the 1997 Australian Open Women’s competition. Fans will also find names such as Holly Monkman’s father Bob Monkman (Dunsborough Galleries), George Simpson (North-west Shelf fishing fleet owner), Patrick Leahy (Westsuits founder), John Molloy (founder of Creatures of Leisure) familiar among the residents.
Vineyards in the area have also attracted a lot of attention in relation to property development, where the smaller vineyards have typically been bought out or have had their crops consolidated with the bigger estates. Michael Wright is among those who have expanded their investment in the area through investing in real estate. His purchase of a vineyard close to the Margaret River represented an investment of over $1.6 million. The Amberley Winery and Cape Mentelle are also being expanded. Heytesbury, the Janet Holmes a Court company also purchased a 182-hectare potato farm in Jindong, to be converted into a vineyard. Situated next to the Selwyn Vineyard and Lionel’s Vineyard, it will be the third in Jindong.
Property growth in Perth not limited to the millionaire’s row
The current growth trend in the property market is not limited to the most affluent neighbourhoods in Western Australia. As per the latest available reports, median rent rates in Perth have increased across the board by close to 3.4%. Unit rents show the most growth at 4.6% . The current median rent for all dwellings in Perth is $599, due to Perth’s 13.4% annual increase in rent, the highest among all the capital cities. In comparison, rental rates in capital cities such as Sydney and Melbourne have only amounted to 12.9% and 12.6% respectively.
Despite the growth in rent, vacancy rates in Perth have also dropped significantly, reflecting the high desirability of property in the area. Property markets in Perth clearly pose a strong investment opportunity for future investors, and will likely remain so for the foreseeable future. However, it is important to remember that the property market is vulnerable to a variety of macroeconomic variables, as well as challenges posed by unforeseeable situations such as a pandemic.
Steady stream of new residents not without added social implications
The steady flow of new would-be residents flocking to the attractions of the coastal suburbs of Perth is not without implications for existing social infrastructure. For example, news media reports have already shown that the public education system in the golden triangle is already under pressure to cater to the new families moving in. According to an anonymous industry expert, this is a reflection of the continued under-investment in the public education system. The increase in population density will be reflected in other public infrastructure as well, such as the public health system, power and energy infrastructure, and telecommunications infrastructure. It is important that these are developed in line with the needs of the community to ensure that no one vulnerable community is undeserved in the quest for development.
(Theruni Liyanage)