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Best Suburbs to Invest in Perth 2025: Our Top Picks | mini ep · The Follio Property Podcast

• 0:09
  Lachlan, what's the best opportunity in Perth right now? Villa units between 650 and 750k. Why 650 to 750? Why that particular price bracket?
• 0:17
  We've got the first home buyer scheme that kicks off now in October. We spoke about that in a previous mini clip. The threshold's gone from 650 to 850K. So it's going to be a free-for-all between that sort of 650 and 750 price point. You want that buffer. So that runway from 750, 850 is really going to kick. So anything that's worth in that sort of vicinity. And it's not to go out there and just throw a dart at a dartboard.
• 0:40
  and buy an asset at that range and hope that you've done well. It's finding assets that you can still buy where there's value, so you're not overpaying. They've still got own occupier appeal. That's really important when buying billy units. And that price point means there's a runway because you're going to see a surge in activity. You're going to see a lot of buyers take advantage of this scheme. And I think it's really underestimated how significantly this is going to impact the market.
• 1:06
  Yeah, it's fascinating. And even just hearing you say that, you'd probably want to aim to the lower end of the scale because the market's moving so quickly. If you're coming in at a 750 budget, by the time you're able to get an asset, you're probably looking at it. It's moved to 800 within the way the market's moving this quickly. Yeah, it is. There's still good opportunities out there, although it's hot. We're seeing, ideally in the off-market space, where you can get the best deals at the moment.
• 1:29
  I see still a lot of value in people. They've gone on a run, the units and the villas in Perth in the last 12 to 18 months. We called it 18 months ago that we're going to take a strong position. I still see the opportunity, Reece, because one of the things that can really impact a market in a negative way is an oversupply. And you could see this in different segments of the market, potentially out of fringe house and land packages where there's a lot of supply that come on.
• 1:52
  But in that sweet spot for villa units, there's no competition. And the reason there's no competition is because developers, it costs them 8,000 bucks a square meter to bring an apartment complex out of the ground. So just for easy math, a hundred square meter apartment, which is a large apartment.
• 2:08
  cost you 800 grand so for them to make profit on that they need to probably sell it 20 to 30 percent above that so you're looking at you know a million to one one so no one's building in that sort of 650 to 750 price point i can't foresee an oversupply in that space over the next 24 months because you can't see construction costs coming down at that level
• 2:30
  So you're really not competing with any additional supply in that price point. So yes, they're not going to be pretty. They're typically older. They might be 70s, 80s or 90s. But there's a scarcity of them because there's a finite amount of these properties that exist in the Perth market and no one's building them. What should they be looking at from an asset perspective? You've mentioned villa units. So I'm assuming you're thinking something with some sort of land component to it. Is that the strategy?
• 2:55
  Yeah, absolutely. Like a villa unit sub 10, ideally, where you might be buying a complex we just recently bought in Sheward Hill. It was 1,200 square metres. There was four in it. So you're still gaining 300 square metres of land. People dismiss that often, and that's, I think, the biggest myth about villas and units. They compare them to apartments.
• 3:15
  They're not. Apartments, you're taking up airspace. You're going to villas, you've still got an underlying land value. And typically, that's quite strong and underestimated. So looking at things that have own occupier appeal and always come back to that. You want to know what your exit solution is. You should always be targeting own occupiers.
• 3:31
  So what's the configuration of that unit like? What's the outdoor space like? Where's the northern face and light is really, really important. What's your amenity score like? So access to hospitals and shopping centres is really important for downsizers. So they're the sort of things I want to be looking for. You mentioned Chewett Hill. There is a location that you've recently bought or we've recently bought as a business. What other areas do you like? What other suburbs do you like for that villa unit space, 650 to 750?
• 3:58
  pockets surrounding Fremantle. You know, we've seen Fremantle go on a huge surge in the last three years, super popular. A lot of activity in terms of own occupier activity in that area. So feeding off that frenzy, we've seen the likes of, you know, Pella units, some in Fremantle specifically.
• 4:16
  Also, like Scarborough, I've made that pretty public, but I still think there's a lot of value there because you get the Coastal Appeal and you can still pick up some really, you know, high land value content units there, and that's really important. Places to probably avoid when looking at this strategy is where there's an over, you know, can be an overexposure of those units. Where I wouldn't buy them, Rhys, is where there's a high saturation of social housing, and that's really important. There's a real difference between an Occupy Villa unit
• 4:46
  four storey, 35, 40 units built in the 80s and 30% of the complex is social housing. That's something I would be avoiding from an investment point of view. And the whole reason we're highlighting this is because of that first homeowner scheme increasing. So it's driving a lot of first homeowners into this market.
• 5:03
  What's the sentiment been like in some of these locations that we're buying in at the moment? What's the feedback from local agents, the buyers agents work with the business? Is it competitive? It's the hottest market in Perth right now because it's the most competitive. So that's, you know, to get your strategy right is really important. We're fortunate that, you know, 60% of our acquisitions occur off market where we don't have to compete.
• 5:25
  For those newbies, and this is the problem, you're not educated on how to structure a deal, you're going to go out there and spin your wheels and get really disheartened. Be really prepared. If you are going to secure something at $750, start looking at price points at sort of $5, $550 because they're running $100,000, $150,000 above what they're advertised. So you want to fail quickly when you're a newbie because if you spend six months looking for this, you're going to miss 10%, 12% of the market very, very quickly.
• 5:51
  I love your strategy about getting in sort of 100K below what the cap is going to be to give that clear runway. 150. 150. Where do you see it going beyond that? I think we're going to get a ceiling in this space, like you sort of see in the house and land value area. You hit a natural ceiling where people can't afford to borrow. So we know what the natural ceiling is going to be for Perth. It's going to be 850. So we're going to see a surge up to that price point. And then you're going to see that market drop off pretty quickly.
• 6:21
  We talk about comparing Perth versus other capital cities, particularly Brisbane's gone on a similar trajectory just a couple of years earlier than Perth. And you look at the data of someone like a Brisbane and it had 10% growth in house prices in the last 12 months, but 20% growth in units. So really showing the back end of that cycle, units were a driving power. Do you foresee, say, in the next 12 months in Perth,
• 6:47
  That being a very similar scenario in terms of units outperforming houses by double the amount? Without a doubt. We're not building that stock. So you're going to see a huge undersupply of it. It's an affordability play. It's a scarcity play. So without a doubt, units will outperform houses in Perth over the next 12 months.
• 7:05
  Okay, Lachlan, you mentioned the Chewett Hill example where there was four there, but if you were a first-time buyer or a first-time investor in Perth right now, looking to take on the similar strategy to yourself, where would you be buying right now? I've spent every weekend meeting and greeting agents in Scarborough, trying to get access to opportunities that they have potentially coming off market. Beautiful. You've been listening to a Folio Property Podcast miniseries.