Next we go to Western Australia where Damien Collins says the market there continues to suffer from the downturn in mining and the over building for first home buyers.  Lots of lessons coming from that part of the country.

Transcript:

Kevin:  One of the markets in Australia that is suffering a little bit is Western Australia. Let’s take a visit there now with Damien Collins from Momentum Wealth and find out exactly what is happening.

Damien, thanks for joining us in the show.

Damien:  Pleasure, Kevin.

Kevin:  Now, we have heard that your state, South Australia, and Northern Territory are not faring all that well, but tell us about Western Australia.

Damien:  Kevin, we’re still suffering from the downturn in the mining sector and also the over-building that happened with the first-home owners grant. As everyone would know, obviously, the mining sector has had a downturn, and that certainly affected job security and the wages paid, so people are less confident, and that’s flowing through into real estate transactions.

The other big thing has been the first-home-owners grant, a lot of people went and built, so that’s [0:51 inaudible] tenants and so our vacancy rate has gone up to about 6%, so rents have come back because of that. Coupled with the other factor that the interstate and overseas migration has slowed down quite a bit.

Look, we’re definitely in an oversupplied territory, not substantially. We’re at about 15,000 properties for sale; a balanced market is about 13,000. The rental vacancy rate is 6%, but having said that, 94% of properties are leased.

Overall, the Pearth market is a bit soft, but what we’ve noticed in the last couple of months is that it seems to be bottoming out, if it hasn’t bottomed already, so expect we won’t see any runaway market this year, but certainly we’re at the bottom or close to it anyway.

Kevin:  What’s the sentiment amongst investors right now?

Damien:  Still very cautious. Certainly, we have seen some east-coast investors come into our market and have appointed us as buyers agents, so they’re, I guess, seeing from a bit further away, seeing the longer-term prospects, not looking at just what’s happening short term in the market. But local investors are still cautious. There is activity but the headline in the press is the high vacancy rate, rent reductions, etc. Confidence is pretty low, so investors are quite thin on the ground overall generally.

Kevin:  What about developers? Are they pretty nervous about the market?

Damien:  Developers are bringing stock to market. Again, with the lack of confidence, they’re finding that people aren’t easily committing to off-the-plan purchases because, again, people think prices may not be much more when they settle in two years. Developers are struggling, and anyone bringing the properties to market at the moment is having a hard time getting them away.

Some projects are going better than others, but there’s still activity for development sites. We do buy development sites for clients, and we find that we are often competing because people are looking at projects they buy now and they wouldn’t bring them to market for at least 12 months and the likelihood is in 12 months when they are to market, with all of the approvals and everything else in place, that the market will be a little bit better.

Kevin:  What sort of projects are popular or most popular? What size of development are you looking at?

Damien:  Generally, the most popular ones are more the boutique level, so anywhere from your 10- to 40-apartment in the suburban areas, in the areas near the amenities, so near the train stations, the café districts, in close within that sort of 10 K radius of the city, and where there’s not a lot of other competition and where it blends in well with its surroundings. That’s what people are looking to buy, and certainly, from a rental proposition point of view, they’re the ones that people