I recently shared some employment and housing data in our Investor Newsletter suggesting Perth’s property market is trending in a positive direction. This is obviously welcomed relief for a lot of patient investors who have experienced a prolonged period of falling rental returns and high vacancy rates. My key message I wanted to communicate was the importance of time-in-the-market (patience & persistence) as opposed to timing the market.
When looking at the current state of the Perth property market it is important to be optimistic of where we are headed however we must remain realistic on where we are currently positioned.
So, is the Perth market booming again?
Firstly, it’s imperative to keep perspective. Its no secret that Perth was hit hard by the reduction in mining investment, anaemic population growth and the increase in unemployment. The State-wide hardship resulted in record levels of vacancies, falling rental returns and falling house prices. Essentially this means we may be getting positive market signs however we are coming off the bottom of a prolonged downturn and hence are not out of the woods just yet.
I recently tweeted that due to the subdued market, Perth has become the most affordable Australian capital city to rent a property. The data shows rentals in Perth require just 19.4% of full time weekly earnings to service the rent, compared to Sydney which is almost double at 34.2%. While this may be welcomed news for renters, property investors would prefer the rental returns to increase to their long-term average.
According to REIWA, the September quarter of 2017 saw the vacancy rate in Perth climb to 6.9% from 6.4% in the December 2016 quarter. Remembering these figures only include properties listed through REIWA and therefore don't include the thousands of vacant self-managed investment properties. Recent figures showed during the December 2017 quarter vacancy rates dropped to 5.5%.
Rental listings peaked at 11,300 in 2016 and have since dropped to 8,912 properties. This is partially due to lower supply (slowdown in the construction of new dwellings) and a slight growth of 0.84% in WA's population.
According to REIWA it currently takes an average of 49 days to find a tenant, 5 days fewer than the previous quarter and only 3 days fewer compared to the previous year.
Perth’s median rent price remained steady at $350 p/w which has remained unchanged over the past 9 months. The median rent price had previously fallen $40 from December 2015 to 2016. This price stability is a great indication that Perth may have found balance in the supply and demand of rental properties.
So, what does this all mean?
It appears from the stats that Perth MAY have experienced the bottom of the cycle during 2017. Are we booming? The answer is no, however the conditions have stabilised over the past quarter and we may be poised for more positive activity in 2018.
Perspective is key, but it always pays to be Optimistic!
Whilst pessimists may be right more often, optimists achieve more in life! I have always believed this to be true in life and business. As the current data suggests, I feel now is a great time to be optimistic about our dynamic property market. I also think we shouldn’t get carried away, expecting the market to return to the highs from the once-in-a-generation 'mining boom'. Property investment should not be viewed as a "get rich quick" scheme, but rather an asset that has proven to appreciate over time albeit with a bit of short-term market volatility.
So, whilst I remain positive about the year ahead I think our road to recovery will be a steady journey. Generating long term sustainable wealth may not always appear sexy, as it usually contains large amounts of patience, persistence and hard work.. While this will excite the seasoned investor it may disappoint the punters. However, if I have learnt anything other the years it is that the secret to happiness is enjoying the journey!
Nothing would make me happier than enjoying the journey together!