Market Outlook – Sales & Overview

  1. Perth’s housing market has demonstrated remarkable resilience and growth, positioning itself as an attractive destination for property investors.
  2. Perth’s property prices continue to increase due to the factors of the housing crisis with a shortage of established homes and limited supply of new homes being constructed, when compared to the demand from Perth’s population growth and expansion.
  3. REIWA states the median dwelling in Perth is now $760k, up a whopping ~17% over the past year, with growth still happening up 0.4% in January and 1% in February.
  4. This slowdown in price growth, has been due to the recent surge in listings for sale, and holiday/new year slowdown, which has contributing to steadier decision-making for buyers. Now properties take longer to sell, shown by the increase in median days on the market.
  5. Credit availability is the next key in how purchases are funded, and some positives have come up for this recently:
    1. The first being stamp duty changes, which is reported as the biggest obstacle for home ownership. Thresholds will increase for first home buyers & off-the-plan concession will increase too.
    1. Interest rates are predicted to drop later in the year, following the election.
  6. Median rent has started increasing recently, showing a tightening of the rental market again.

Takeaway:

Despite this slight recent slowdown, certain suburbs continue to perform well, and attractive well presented houses are snatched up by buyers. It comes down to the old real estate adage, location, location, location.

Market Overview – Rental

  1. The rental landscape mirrors the sales market’s strength, and in fact, led to previously correct predictions in our prior market updates.
  2. With median rental returns stabilising at $650/wk last year for majority of the year, this was due to several factor
    • Student VISA cancellations/reduction
    • Return to co-living & shared housing
    • Change in the rental increase law from 6 months to 12 months
  3. Why does the rent affect the sales price? The rental yield and returns.
  4. Investors were previously very keen on the high yields, 7%+, of the Perth property market and jumped in, causing the large surge in activity and spike in price. When yields stabilised and decreased due to the property prices increasing and rent prices stabilising, investor activity slowed, and we had a shift to the home buyer market in the second half of last year.
  5. Median dwelling rents have started to increase this year and have risen to $680/wk, per REIWA, already approx. a 5% increase compared to around September last year.
  6. Why this increase now?
    • Rent being able to be increased now following the additional 6 month wait for landlords to increase the rent (as the law kicked in at the end of July
    • Vacancy rates increasing allowing some tenants to start to move to non co-living spaces and shared accommodation.
    • Increase in vacancy rate over the whole Perth region allowing some people to move to preferred suburbs.
  7. With the stabilisation of rental prices previously and the increase in vacancy rates, we may expect people who have moved to the outer regions of Perth for cheaper & more readily available rental properties to start to consider moving back into the Perth inner suburb region.
  8. Vacancy rate doesn’t show the full picture. Many core & sought after suburbs have very little available rental properties, per real estate investor.
    • Willetton 0.6
    • Queens Park 0.6%
    • East Cannington 0.6%
    • Kardinya 0.4%
    • Westminster 0.4%
    • Tuart Hill 0.6%

 Takeaway: 

With an increase in rental returns, there is still space in the market for investors to capitalize on the strong demand from tenants in core and sought after suburbs. 

 For example, the outer regions without too much established amenities, were once popular choices for renters seeking lower costs. These areas may experience an even slower, potentially flat and declining, rental growth and potential vacancy issues as tenants no longer need to move far from the city for affordability and opt for more accessible locations closer to major amenity hubs and employment centres.