Rich Lister makes near $1b punt on Perth property
Betting on growth: Perth property developer Paul Blackburne at his Dalkeith home last week. Trevor Collens
Perth’s property market will blitz its east coast rivals over the next 5 years
Rich Lister Paul Blackburne is charging out of hibernation with a bullish $1 billion punt that Perth’s property market will blitz its east coast rivals over the next 5 years.
Mr Blackburne, the 44-year-old who has built a $567 million fortune through his eponymous apartment development company, pressed pause on projects during April. But after assessing the potential economic fallout from the pandemic he recently revived the company’s pipeline, including pushing the trigger on a $300 million luxury apartment precinct in one of Perth’s most affluent suburbs.
“Western Australia is without doubt going to be the strongest property market in Australia over the coming five years,” Mr Blackburne said.
“We are not as reliant on the industries affected by COVID-19 as the east coast. Mining has been going strong and we had already adjusted to low growth in tourism and overseas education.”
Iron ore prices are roaring as crippled Brazilian supply and Chinese demand push prices above $US100 per tonne and deliver a potential multibillion-dollar royalty windfall for the WA government.
But the McGowan government says the iron ore boom isn’t enough to prevent a recession, forecasting the economy to contract 3.1 per cent in 2021 with mining royalty gains more than offset by lower payroll tax, property taxes and GST grants.
Mr Blackburne argues the pandemic merely delayed the city’s property recovery by three to six months. Blackburne Group is seeking development approval for the old Sundowner Hostel in Claremont, which borders swanky Peppermint Grove.
Mr Blackburne needs council approval for the massive five building development called Claremont by Blackburne, which he says will create 400 jobs during construction of the 245 luxury apartments. That’s less than the 364 apartments previously endorsed for the site by the Town of Claremont. Blackburne bought the 15,767 square metre site late last year for $25.1 million.
He said most of the residences will be below five storeys, with the remainder taking advantage of views to the Indian Ocean or Swan River from the 16-storey and 11-storey buildings.
Mr Blackburne wants to start work on the project as soon as he can get approval and is hopeful construction can start early next year.
Perth completely missed the east coast property boom, with median house prices falling more than 13 per cent to $479,000 since mining and business investment dried up in 2014. The market was beginning to show signs of growth just before the pandemic struck.
But it is because the market has already suffered a deep downturn that fills Mr Blackburne with confidence a rebound is on the way. He said during the lockdown in April inquiries jumped 39 per cent.
“I think the Perth market will double in value over the next 10 to 15 years as it has on average over the past 100 years,” he said.
Real Estate Institute of Western Australia figures show houses listed for sale are down 30 per cent on a year ago while listings for rental properties are down 42 per cent.
“We were entering a recovery phase and growth would have been 3 per cent to 5 per cent a year for the next few years,” Mr Blackburne said. “COVID has just paused that for three to six months. I think we are at the bottom now or very close to it and there will be a rise of $20,000 to $30,000 a year in the median price over the coming years.”
Chamber of Commerce and Industry chief economist Aaron Morey agrees the property market has “largely corrected”.
But he’s far less bullish about the outlook for prices in the coming year or two.
“A few factors will weigh on the market looking forward, including weakness in the household sector with job losses and pay cuts. On top of that mortgage repayment deferrals and JobKeeper are coming to an end, and there will be a reduction in net migration, all while governments are boosting supply with construction grants,” Mr Morey said.
“Ultimately, a sustainable housing and construction sector will be underpinned by strong business investment, which brings with it population growth. To achieve that we need governments to create a more competitive business environment by substantially lowering the tax burden on business.”
Mr Blackburne doesn’t think falls in migration will have such an impact on prices. His company in particular relies on affluent residents downsizing to his luxury apartment offering.
But more broadly he feels population growth over the next 5 years will be about what it was predicted to be before the pandemic hit.
“Immigration will increase and the post recession boom will result in a baby boom like what happened post World War II. I think migration will double next year to make up for any shortfall this year. With low rates this will lead to a huge shortage of supply.”