Tuesday, 7th of April 2020
Perth’s property market was poised for strong growth in 2020 backed by encouraging data observed throughout January and February. But how has the COVID-19 pandemic affected our property market? And what does this mean for investors and tenants seeking clarity amongst all the media noise?
Below we explore what the most recent data is telling us about Perth’s property market. We also identify what economic factors matter most and what Government initiatives will support these factors during uncertain times.
Market Analysis – Week Ending 05 April 2020
The local property market has started to show signs of slowing down as the effects of COVID-19 are felt by the business community, investors and consumers.
According to REIWA, available rental supply increased slightly this week by 1.5%. For perspective however, this is still 19% lower than levels seen this time last year - evidence of the recovering rental market through the start of 2020.
Figure 1- Perth Market Snapshot for Week Ending 05 April 2020 (source: REIWA)
However, REIWA also reported leasing activity decreasing by 17.5% last week - a logical effect of the restrictions placed on home opens by the Government.
Surprisingly at PPM we have experienced the opposite, with 11 properties leased in the first week of April alone, our strongest start to a month all year. Despite home open restrictions, our team is reporting strong interest in our vacant properties with quality applications continuing to be received and processed every day.
The latest data published by REIWA shows a median rental price for houses of $370/week and $330/week for units, with a combined vacancy rate just over 2%.
Figure 2 - Perth Rental and Vacancy Rate (source: REIWA)
Domain’s research team has published more recent rental data showing Perth with a vacancy rate of just 1.8% for March 2020, a 44% decrease from the same period last year.
Figure 3 - Capital City Vacancy Rates March 2020 (source: Domain)
REIWA also reported a steep 31% decline in sales activity for the week (22% drop in house sales, 49% drop in unit sales and 31% drop in land sales). Stock levels remain low with investors recognising the market uncertainty and may be unwilling to sell their investments at values below what they are worth.
Once the effects of the virus are behind us, we predict the marker will return to normality, with Perth continuing its property market recovery journey.
Macro-Economic Factors Affecting the Rental Market
The recovery in Perth’s rental market seen in Q1 this year was primarily due to increased economic activity (i.e. mining spending and unemployment figures) and competition amongst tenants. The competition has been fuelled as a result of fewer new homes being built and less available rental properties on the market.
This implies the biggest factor moving forward will be the affects COVID-19 has on the unemployment rate. If Perth’s unemployment rate rises this will put tenants' ability to pay rent in jeopardy. If as many jobs as possible can be preserved, then the rental market can weather the storm. It’s all about JOBS!
For this reason, the JobKeeper initiative announced by the Government, once legislated, will have a huge effect on preserving the cashflow from tenants to landlords. This seems to have industry and bipartisan political support and is expected to be formerly pushed through parliament later this week.
The Bottom Line
In summary, the WA property market will likely be impacted in the short term due to the effects that COVID-19 will have on the economy. Any potential negative impacts and investment risks can be managed by smart decision making. It’s important you talk to your property manager, or Kristy, so we can assist you wherever possible.
Macro-economic factors such as employment rates will be of particular importance in keeping cash flowing from rent payments right through to mortgage payments. Federal and State Government initiatives have been announced to assist with ensuring the health of the national economy and the property market.
This information and additional support resources for landlords and tenants is available on both the ASIC Moneysmart website and the Federal Treasury website (for individuals, households and businesses).
Keep The Faith
We will keep you informed with the latest property market information, statistics and trends so you can make the best possible decisions with your investments or tenancies. Whilst our rebound in Perth was only starting to take effect, don’t lose faith.
The virus will undoubtedly slow the recovery process, but the rebound (especially in WA) could be financially rewarding for savvy investors who take advantage of the short-term economic impacts.
From the entire Team at Perth Property Management, please stay healthy, connected and informed.