Friday, 8th of October 2021
If you’re a savvy investor with a keen eye for spotting and capitalising on emerging opportunities, the Perth property market has certainly been one to watch over the last 6-12 months. Low vacancy rates, high demand, short supply and forecasted growth have all led to some notable opportunities for landlords and owners to capitalise on their property investment options throughout the Perth suburbs – but what is the best approach during this rare bubble of opportunity?
Emerging Opportunities For Investors
The buoyant Perth property market currently presents numerous opportunities for investors to seize the moment, ranging from investors adding to their existing portfolio, or reconsidering their rental prices to maximise returns on current leased properties now that the rental moratorium is over.
We’ve also seen a surge in investors looking to sell their assets in order to recoup immediate profits after recognising notable shifts in demand, alongside lacking stock. With so much opportunity in the local marketplace, it can become difficult for investors to decide what to do next when the market is forecast to experience notable growth in the coming years.
Do you sit tight and continually improve your rental returns so that your tenants help you pay off your mortgage?
Do you sell now to top up your capital, with a view to potentially invest at a later stage?
Or do you acquire more properties at bargain prices to boost up your portfolio and add to your ongoing returns.
There really is so much to think about…
Aligning Your Investment Goals
Your next steps as an investor within the primed Perth market, all comes down to the simplistic notion of What do you want to achieve from your investment property?
Whilst it may seem obvious, this question dictates where to take your next investment decision, which can be broken down into the following options:
- Long term goals:
- Building your capital by holding onto your property now for a future sale later
- Adding to your investment portfolio ahead of forecasted growth in property values
- Maintaining a cashflow positive investment with healthy ongoing rental returns
- Short term goals:
- Selling your property to make immediate profits back from your property sale
- Increasing your rental returns to match demand and maximise current profits
Our team at Perth Property Management make sure to work with investors to strategise the best approach, however the conversation begins with the above considerations. Unsure of where you sit or your current options? We welcome you to book a strategy session with us.
To Sell Or Not To Sell, That Is The Question
Properties have traditionally been undervalued in the local market, which has led to prime opportunities for property investment in Perth.
The housing market has consistently proven to be fruitful for investors playing the long game, so undertaking a buy now/sell later approach is a tried-and-tested strategy that has worked for decades. It must also be said that a prerequisite of this form of strategy is most definitely patience and a mindset of delayed gratification.
Property Investment In Perth Requires Patience
In the wise words of business magnate and seasoned investor, Warren Buffett, "Our favourite holding period is forever." which indicates that time is a valuable asset for patient investors.
Whilst sitting on property can be a risky stance due to the unpredictability of future events, the resilience of the Perth property market cannot be underestimated.
Even global risks like COVID-19 had less impact on market growth than initially expected, with WA leading the nation in property growth throughout the pandemic(covered in our article Investing In 2021 – Why WA Property Is Poised For Growth.).
Despite the Perth market seeing prices fall by over 20% in the last 5 years, using a longer lens will reveal a 221% increase in median house prices in Perth since the early 2000s! As shown in the chart below, the Perth median house price went from just $160,000 in the year 2000, up to today’s median which currently sits at $515,000 – food for thought for patient investors.
Perth Median House Price 1990 to 2020 (Source: REIWA)
Positive Signs For Strong Rental Returns
Before you look at selling your investment property during the current climate, it’s worth noting the associated opportunity cost which may come from lost rental returns once you hand over the keys.
Taking a look at the current levels of rental returns, Perth experienced a 16.7% increase in rents over the past 12 months – and aside from Darwin, is significantly higher than every other Australian capital city.
Since the rental moratorium was lifted in March 2021, we’ve seen rents increase by an average of 10-20% with landlords reaping the benefits of adjusted prices in line with current supply and demand. As seen below, Perth sits in a very strong position for rental returns, so, selling your property would mean an end to ongoing rental returns, which could continue to increase as we look ahead towards 2022 and beyond.
According to recent REIWA data, Perth rental prices for houses have increased to $450/week (which is the 5th consecutive month of increases) whilst rental prices for units have increased to $400/week. We are also seeing a 23% decrease in the number of rentals on the market when compared with a year ago, indicating that high levels of demand are driving the rental market.
Rental returns of major Australian capital cities (Source: Macro Business)
Still Unsure Of What To Do Next?
Whilst there is no right or wrong answer about how to capitalise on the current investment property market throughout the Perth suburbs, it pays to ensure your strategy is aligned to your goals. Whether or not these are short term, long term or a blend of both, the team at PPM are experienced in working closely with our investors to set up and implement customise investment strategies that get results – in fact we often exceed our clients’ expectations.
If you’re unsure of your next steps in the current Perth property market, we welcome you to contact us for a rental appraisal or strategy session today. You may wish to also request a chat with our Director, Kristy Copping, who was recently awarded Property Manager Of The Year at the REIWA Excellence Awards for the second time in 3 years, covered in our recent article here.