Property Investment Perth: The Changing Rental Market
Thursday, 8th of October 2020

 

Boom Time for Perth Property Investors

 

As we emerge into a post-COVID world, and with WA largely avoiding the worst of the economic impact, there are signs that Perth’s property investment market is on the cusp of a boom.

 

According to recent data from the Real Estate Institute of WA (REIWA), rental vacancy rates are at a 12-year low. Meanwhile, Perth remains an affordable option for investors, making it an ideal time to consider increasing your portfolio of rental properties.

 

And while you may have some concerns over the Federal Government’s COVID-19 rent laws, we have seen and heard anecdotal evidence that very few Perth tenants have needed to access those rights.

 

Strong Demand for Rental Properties

 

Rental properties in Perth are not staying vacant for long. REIWA data from August 2020 indicates that it takes about 3 weeks to lease a property in greater Perth – nearly 2 weeks down on the same period last year.

 

There are a few reasons for this:

  • A shortage of rental stock – about 3000 properties listed for rent, 50 per cent fewer than August 2019.
  • Repatriated Australians, and Western Australians moving back from the eastern states, looking for accommodation.
  • Fewer people buying investment properties due to concern about the impact of COVID-19.

 

All this contributes to the low vacancy rate and makes investing in the Perth property market an attractive option.

 

 

What Does a Low Vacancy Rate Mean?

 

Vacancy rates give you one of the best indications of the health of the property market. It is thought that a rate of about 3 per cent means a balanced market. Below that, and landlords have their pick of tenants in a “landlords’ market”. Above that, and renters have more power to negotiate lease terms and rent in a “renters’ market”.

 

Perth vacancy rates are sitting around 1.3 per cent with our own vacancy rate sitting lower at just 0.8%. This is compared with about 3.5 per cent for Sydney and Melbourne.

 

 

Sydney vs Perth residential vacancy rates. [Source].

 

 

Landlords and tenants can use this low vacancy rate to analyse the market and determine the next steps.

  • Landlords may choose to increase rents (if a tenant vacates)
  • Tenants may be able to lock into longer lease terms at current prices.

 

Both of these are great situations for property investors to increase their portfolio – great tenants, on long leases, paying competitive rents.

 

But remember, vacancy rates can be volatile – you will want to see a trend before making a final decision. Over the past four years, Perth’s vacancy rate has been steadily declining from a high of about 5.5 per cent. This is changing the city’s rental market landscape – where once investors overlooked Perth in favour of markets such as Brisbane, savvy property prospectors are now setting their sights to the West.

 

 

Buyer Competition Driving Up Prices

 

Not only is the rental market changing, there are indications that the Perth real estate market is bouncing back, with increased buyer activity as COVID restrictions ease.

 

In fact, according to REIWA, 45% of Perth suburbs recorded price growth in August 2020.

 

While much of this appears to be at the lower end of the market, perhaps due to first homeowners taking advantage of Government incentives, it does mean that your investment in Perth property is sound. Low vacancy rates can lead to more interest from investors, pushing up prices and suggesting future capital growth. But your time to act might be limited as competition heats up.

 

In an article for Property Investor Magazine, CoreLogic’s Head of Research Australia, Eliza Owen, says Perth is the only capital city where sales numbers were above the pre-COVID average.

 

 

Capital Growth

 

There is no doubt that the concern about COVID-19 concessions led property investors Australia-wide to get cold feet. But while these may continue to have some short-term impacts on rental returns and capital growth, the long-term outlook is reassuring. As mentioned above, Perth real estate sales are strong, and prices are increasing, while still being affordable for owner-occupiers and investors,

 

And with Western Australia showing a range of signs that COVID-19 did not have the economic impact here than it did many of in the eastern states, concerns about investing in the local property market are abating.

 

 

 

Investment Confidence

 

In July 2018, when our rental vacancy rate was hovering around 4 percent, and falling, we suggested on the blog that perspective was key to successful property investment. After a long slump due to the reduction in mining investment, the Perth property market was clawing its way back. In January, 2020, we asked “Is 2020 'The Year' For Investment Property Growth in Perth?”

 

And while we all know what happened next, we stand by those pre-COVID predictions. Despite consumer confidence falling, Perth is still one of the most affordable capital cities to invest in. Rents have remained steady at about $370 for houses and $335 for units. Finally, our low vacancy rate means we are a landlords’ market – and tenants are looking to lock into long-term leases.

 

But we need to attract more property investors, before vacancy rates drop much further and we face a serious rental crisis where there are more tenants than available accommodation.

 

 

It’s Time To Look At Property Investment In Perth

 

The shortage of rental properties, low vacancy rates, strong demand, steady rent returns and future capital growth presents a great opportunity for those looking to get into investment properties or expand their portfolios.

 

If you need an award-winning property management agency to help you maximise your investment’s potential, contact Perth Property Management today.

FROM OUR PERTH PROPERTY BLOG