As predicted, the McGowan government’s decision to extend the emergency response provisions of the Residential Tenancies Act (RTA) now to end in late March has helped shape a rental shortage into a rental crisis.
A potent combination of subdued investor activity for several years, massive foreign investment taxes, subdued yields and capital value losses has combined with strong repatriation demand from West Australians returning home to boost demand and savage supply. The result is a vacancy rate across Perth of 0.8 percent; the equal lowest level recorded since we started measuring such things.
With rents increasing and yields improving, investors normally emerge and add much-needed rental stock to the market but the extension of the COVID-19 emergency laws impacting all residential tenancies has help keep investors away.
These very low vacancy rates are driving up rents as tenants desperately compete to secure a home in a market starved of supply.
By the time the emergency provisions of the RTA expire in late March this year, the upward pressure on rents will be at pressure-cooker levels. The current ban on rent increases for the 98.5 percent of tenancies unaffected by COVID-19 simply compounds the build up of rent increase pressure.
In a market where rents are rapidly rising, existing tenants are understandably staying put whether they’re impacted by COVID-19 or not. Many of these tenancies will convert to periodic leases by the time March comes around. Lease renewals negotiated at this time will probably be around 15% above current levels with sitting tenants unwilling to pay the extra moved on in favour of new tenants that will.
Tenants are well advised to save some funds now for when rents ramp up in March.
Investors need not fear further extension of the emergency provisions as this would require a re-convening of parliament two weeks after the election in order to try Aussie Online Casinos and further extend laws that are to automatically end on 28th March 2021.
With rents almost assured to rise significantly in April, and with money very cheap indeed, property investors should now be making serious moves into acquiring property either in the established market or off-plan.
The shortage of supply and the promise of rising rents post March will stir investor activity but by then prices will have risen and buying choices will diminish as supply shortens.
Smart investors only buy in rising markets and with Perth’s property values already on the march, it would be wise to make your play now, take the pick of the quality properties on offer and not wait for a choice-constrained environment.
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