This week, REIWA reported Perth’s residential rental vacancy rate dropped to a record low of 0.4 percent in March. A balanced market records vacancy rates at around 3.5 percent and in sharp contrast to early 2018 where vacancy rates were at 7.3 percent and over 12,000 properties were advertised for lease on reiwa.com. Today there are 1,963 advertised.
Median Perth rents are at $649 per week with properties offered for lease below this figure in higher demand than those above the median. Accordingly, properties advertised at less than $1000 per week are leasing in about two weeks, whereas those at above this figure take about 21 days to rent.
Core Logic shows Perth’s rental value is up 14 percent in the twelve months to March 2024, leading the nation amongst capital cities which averaged a 9.6 percent increase. Applied to Perth’s current median rent, a further 14 percent would see Perth rents hit $740 per week this time next year.
The core of the problem is the shortage of housing supply at a time when migration levels into WA are rising contemporaneously with deteriorating construction approvals for new homes. Apartment approvals are at decade low levels falling to around 375-unit approvals last month against our 10-year average of about 725 units.
Thankfully, investors are relatively active with 36 percent of mortgage demand in Western Australia coming from investors. This is up from the decade average of 24 percent and just 15 percent in 2019. The upside to this renewed investor enthusiasm is more rental stock coming into the market adding to supply, with the downside for first home buyers being investors buying stock that might otherwise have gone to them, which ultimately push up house prices.
And prices are rising most in typical first home buyer regions. Remarkably, 8 of the top 10 local government regions across Australia for annual price growth are in Perth with the affordable regions of Armadale, Gosnells, Rockingham and Kwinana the top four performers up between 25.8 percent and 28.6 percent. Serpentine – Jarrahdale, Wanneroo, Cockburn and Mandurah all made the top ten up around 23 percent.
In a balanced market, as house prices moderately rise, rents typically ease as first home buyers leave the rental market and enter home ownership. The opposite applies when interest rates rise and home prices abate, demand for rentals rise, pushing up rents.
Today’s market is different. Perth is experiencing a renaissance of sorts after a prolonged period of negative or negligible growth from 2009 to 2019.
During this decade, under-investment locally has caught us off guard with the speed of market recovery leaving us hopelessly short on supply during a time where construction costs remain a deterrent against meaningful and rapid increases in housing stock.
You know you’re getting on a bit when you start sounding like your parents. Starting a sentence with, “Well, in my day…” is a tell-tale sign. This week’s column has that flavour as a lament of real estate days gone by. As an active selling sales representative for John Dethridge … Read more
The global COVID-19 pandemic fundamentally changed Perth’s property market. When COVID hit, most property commentators predicted property values would fall by about 20 percent – they were about 40 percent wrong. Property prices in Perth have risen by 75 percent since March 2020. Rent’s have gone up by the same … Read more