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Wednesday, May 2, 2012

AU Apartments in Perth

This is the 2nd in a series of posts on what we learnt about buying property in Perth.

So, that's it. We've gone and done it... bought an apartment in Perth even before we got there. It sounds like a risky thing to do but really... when we got there, there was nothing much more to see anyway that would have made the decision different. It was a patch of empty land fenced up by sexy marketing billboards with a sales office at one end housed within a converted container. Much of my research and analysis was already done through the internet before we even stepped on the plane.

AU Apartments is on Hay Street in East Perth, which is one street away from St George's Terrace (the Shenton Way of Perth). At present, similar apartments in that area command a rental of AU$750 a week (i.e., AU3000 a month). Some evidence suggests that this could be AU$850 a week (i.e., AU$3400 a month). We used the even lower estimate of AU$650 to compute the yield on leveraged capital and decided that we liked what we saw.

Over and above the basic notion of rental yield, we allowed ourselves to be convinced by the fact that the apartment was situated in a part of town that (even though very near to the Shenton Way of Perth, i.e., St George's Terrace) was rather old and somewhat in disrepair. This part of Perth is so old that The Perth Mint (dating from 1896) is right smack in the middle of it, and AU Apartments is right opposite The Perth Mint. It sounds stupid no? We bought an apartment in the least reputable part of Perth town?

My logic follows my observations of what happened to Singapore's Clarke Quay and Robertson Quay... and what happened in West End Brisbane - The Husband and I missed the opportunities that abounded 15 years ago with the conservation shophouses along Joo Chiat Road and those in Chinatown. They looked so old back then and could be bought for a song. Look at them now, though! And of course, each now costs a stunning inheritance.

Recognising the same confluence of variables in East Perth that we had noted so many times before but weren't clever enough to exploit, The Husband and I thought AU Apartments on Hay Street too good an opportunity to be missed. Like I said, Hay Street is only one street away from St George's Terrace (Perth's Shenton Way), and I really doubt that the street that is one street away from Perth's equivalent of Shenton Way will escape rejuvenation in time to come. In time to come, we expect larger gains in East Perth than in the already chi-chi areas of Perth.

I also considered migration patterns into Perth. I know that the boom in global demand for minerals has been much hyped about but there you have it, it did play a role in our calculations. We expected the global demand Western Australia's minerals to grow. More people will move into Perth to work in this burgeoning sector. Perth suburbs comprised mostly of single storey homes are already spreading far outwards, requiring people to travel an hour plus from home to Perth CBD. Land plots used to be sold at 700sqm per house. Today, a plot per house can be as small as 350sqm. The process of densification has begun. Densification is the process of increasing population density in an area - allowing more people to live together on the same square footage of land. I do believe it's a matter of time therefore that the people will prefer to live in high rises close to the CBD so as to avoid the hassle of travelling.

It isn't happening right now, because that suburban house with a garden is still a sought after Australian dream. Yet, I did read a report that young Australians have other dreams - and another report that stated the opposite - So, it really is up to the reader to make a judgment call.

So... if you have a bit of cash to invest, you might wanna consider AU Apartments? If you do, look up Neil Kay  at, the housing agent from Knight Frank whom I found most efficient and quick to respond. I had been in touch with other housing agents for other Australian properties and not one matched Neil Kay in speed and responsiveness.

The man is a darling - more about him here.

Before committing moneys, readers MUST do due diligence. Please look at loan interest rates, exchange rates, cash flow, capital gains taxes, taxes on interest, costs of maintaining a property etc... because every investment contains inherent risks.

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