WA MARKET OVERVIEW
WESTERN AUSTRALIA
Stephen Harrison - Joint MD - Ray White Commercial - WA
Reflecting on 2023, how would you describe the year in terms of activity, buyer and vendor sentiment and what were any underlying trends that stood out? In terms of activity obviously transaction volumes have been down for a variety of reasons, but mostly due a lack of stock. In terms of sentiment, it’s been a bit of a mixed bag depending on the asset class and asset value. But broadly speaking, despite the lower transaction volumes buyer sentiment in WA has remained strong. We saw a huge increase in demand for ‘in one line’ residential assets, industrial and medical. Demand for shopping centres remained robust, While, despite strong fundamentals, demand for child care and fuel assets cooled slightly (making them good value buying). The cost of money has had an effect on larger assets. There are willing sellers and willing buyers, but with the current cost of money & returns on alternate investment (such as deposits and bonds), the buyers can’t make the metrics work and the sellers are not willing to sell below book value and are largely are not under pressure to do so. Notwithstanding, we will still see the right kind of assets selling at 6.25% and 6.75%. We have just started to see an increase in activity in development sites, as construction costs stabilise and the value of the finished product continues to rise. On-market transaction volumes seemed to be comparatively lower, but what did you observe in the off-market space in 2023? We saw a significant increase in off market industrial sales. Demand was so high, creative agents have been able to work with buyers wanting to avoid competition, to present offers to sellers well above their expectation. However generally across the board, there has been an increase in sellers not wanting to publicly dispose of assets and buyers seeking to avoid the competitive tension created by on-market campaigns. Which asset classes best withstood the market headwinds in 2023 and is this likely to continue into 2024? Most of WA property has remained robust against the increased cost of money. And with the prospect reducing interest rates, it will likely continue to do so into 2024. But there are two asset classes that more than withstood heads and actually saw significant increases in value. Obviously industrial remains a very tight market, with sellers to a large extent been able to ask ‘above market’ prices and achieve them with minimal friction. But also, ‘in one line’ groups of residential apartments and other special residential assets, have seen a significant increase in demand and value as rent soared increasing the yield. Also given
STEPHEN HARRISON
132 – November / December 2023
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