Prime ocean front land in Cottesloe has halved in value, wiping millions off what owners originally paid for the rare earth blocks in the past decade.
Leading real estate agent Greg Rossen researched the fortunes of several adjoining blocks on Marine Parade and found they had plunged in value by an average of nearly 50 per cent since 2006.
“I looked at the sales history of numbers 236, 238 and 240 Marine Parade – all 364 square metre blocks – and a house, 61 Margaret Street,” he said.
All four properties were most recently owned by the same owner or by a company related to that owner.
Mr Rossen found the block at number 236 originally sold for a hefty $3.3 million in June 2010 and resold last October for a bargain basement $1.75 million.
“That’s a drop of 47 per cent,” Mr Rossen, a former Real Estate Institute of WA president, said.
“Number 238 sold in March 2008 for $4.95 million. Last October it, too, went for $1.75 million – that wiped off 64.6 per cent of its value,” he said.
The Nedlands agent said number 240 came with a $3.85 million price tag in mid-2006, but owners only recouped $2.5 million when it was sold in October.
The home at 61 Margaret Street suffered a similar plunge with a price of $3.8 million in October 2009 slumping to a resale value of $2 million in July.
Mr Rossen was quick to point out these sale prices weren’t driven by the particular circumstances of an individual owner.
“If you look a little further down the road, numbers 218-220 Marine Parade on two blocks [each also 364 square metres] sold together for $11 million in 2007,” he said.
“Just five years later they sold for $5 million – a drop of 54.7 per cent.
Mr Rossen pointed to the global financial crisis, the rise and drop off of the Chinese market and the resulting plunge of commodity prices as key drivers of the price shock.
But he also drew historic comparisons with WA’s boom economy of the 1890s gold rush era that saw the constructions of properties like the majestic “Tukurua” that sits on 5000 square metres of prime ocean front land.
“While the gold rush boom was on, big houses were built on massive blocks like Tukurua in Cottesloe. Can you imagine the luxury?” Mr Rossen said.
“After the boom was over, many of these stately homes fell into disrepair. We can draw a parallel with the recent collapse of the iron ore prices.
“It’s a myth that the most expensive properties significantly retain their value – the real issue is the number of wealthy people who can afford to buy them shrinks dramatically.
“The recent sale of Tukurua property proves this – only one person had the money to buy it.”
After a contentious and protracted negotiation, mining magnate Andrew Forrest bought the historic property for $16 million.
Mr Rossen said at the peak of the market the land-only component of Tukurua could have been valued at $35 million.
“Instead it eventually sold – in a flat market – for around $3300 per square metre,” he said.
“It was on the market with two agents for a long period of time between July 2014 and March 2015. That indicates the sale price is the current ruling price.
“Local agents won’t thank me for highlighting this, but on the other side of the coin, it’s a reality check for some sellers who are still stuck in the belief that Cottesloe is somehow immune from the wider economy.”
Mr Rossen was quick to reassure Cottesloe homeowners that if they weren’t under any mortgage or job stress, they should continue to enjoy their family home.
“The median price in Cottesloe at the end of 2007 was $1.82 million. The median price in Cottesloe at the end of 2015, was $1.8 million,” he said.
“That’s seemingly a small drop – but if you consider how much the house would have been worth after nine years of normal growth, homeowners have already endured a big loss.”
Chief economist for the Domain group, Dr Andrew Wilson, agreed with Mr Rossen’s parallel with the 19th century gold rush boom.
“Buyer activity in top-end Perth property peaked with the great WA mining boom that ended in 2008,” he said.
“The median house price of the top 10 percent of suburbs peaked at $1,305,000 over the March quarter of that year in a raging bull market reminiscent of the gold rush of the late 1890s.”
Dr Wilson said the GFC and a receding resource sector impacted the demand for prestige property. A stagnant sharemarket had also kept a lid on top-end house sales in Perth.
“Early signs however are emerging of a revival in prestige property sales in Perth with growing perceptions of significant value driving increased buyer activity,” he said.
The median house price for the prestige market segment increased by nearly 1 per cent to $1.21m over the December quarter 2015.
“December’s result was the highest median recorded over the year for the Perth prestige market,” Dr Wilson said.
Cottesloe reported a median house price of $1,740,000 over the six months ending December 2015.
“This was an increase of 7.7 percent over the $1,615,000 median recorded over the previous September quarter,” the chief economist said.
“Although prices revived over the latter part of 2015, the median house price for Cottesloe remains 20.9 per cent below the previous peak of $2,200,000 recorded over the six months ending June 2008.”
Dr Wilson said a recent rise in the iron ore price and a rebound in the share market plus growing perceptions of exceptional value opportunities would enhance the early momentum now apparent in Perth prestige property.