WA residential real estate
The past six years have been tough for Perth’s property market but maybe the tide has turned.
Perth dwelling values fell by more than 22% from highs in June 2014. For any home or investment property buyers from 2008 onwards, breaking even on a subsequent sale has been a measure of success.
Regional markets are also booming. You will struggle to find a rental property, a holiday home, a vacant block or an available home builder anywhere across Albany and the south west.
If current trends continue, price rises and rental increases may be back again.
From a vacancy rate of 6% only 2 years Perth’s residential vacancy rate continues to decline, falling below 1 per cent, to be at the lowest it has been in 13 years.
According to REIWA President Damian Collins, the residential vacancy rate in WA will potentially reach the lowest we have ever seen of 0.8 per cent seen in March 2007 with the mining boom in full swing and the Global Financial Crisis just waiting to arrive.
“With rental listings in Perth falling eight per cent to 2,926 over the month, we have certainly hit a rental crisis where tenants looking for a rental will potentially find themselves unable to find a home,” Mr Collins said.
“In addition, the reduced supply is putting upward pressure on rents with property managers on the ground finding increases in rent are occurring on new leases, as prospective tenants are in competition with each other to secure the limited supply.”
Typically, during a time of low rental vacancy, investors would enter the market and increase stock levels however this year is unprecedented on many levels. Investor activity is low as investors watch the global impact of the Covid crisis.
Mr Collins said that investor bought properties were only 17 percent of the current Western Australian market, much lower than the expected 30 per cent or more of the available properties owned by investors. At the same time, investors are exiting the market, meaning the supply of rental properties is not sufficient to keep up with demand.
Sales activity increased one per cent in Perth this week, with REIWA members reporting 900 transactions.
This increase can be attributed to a six per cent rise in house sales, four per cent fall in unit sales and 20 per cent fall in vacant land sales over the week. Vacant land sales have also boomed in recent months with building stimulus packages on offer from both the Federal and State Governments. This has resulted in land developers caught out by the sudden and overwhelming demand.
What’s going on?
People – net migration in WA has rebounded in recent months. FIFO workers from the eastern states have relocated to WA as a result of the border closures. Expatriates are returning to the Covid safety and strong local economy in WA.
Interest rates – are low and appear to be going lower. The official RBA Cash Rate is at 0.25% and incredibly there is discussion of rates going negative. Home loan rates are down near 2% so money is cheap and the Banking Royal Commission is a distant memory as the Federal government encourages banks to ramp up lending.
Value – following an extended decline in Perth and rises in the eastern states, Perth is relatively cheaper than other Australian capital cities.
Alternatives – or should we say, what alternatives? Foreign holidays are out. Term deposit rates are woeful. The stock market delivered a month long scare in February and March and recovery is good but not enough for the “bricks and mortar” investors to feel confident again.
Cash splash – JobKeeper, Cashflow Boost, Federal and State government housing stimulus, rebates on utility bills. Some parts of the economy are awash with printed cash. $2,000,000,000 of iron ore is being shipped out of the state each week (yes, that many zeroes is correct).
Western Australia – looks the world’s best place to be for riding out Covid. Fingers crossed our luck remains.
Holiday homes – no longer are they booked only in school holidays. Demand to wander out yonder and holiday in WA has gone through the roof. Southern locations are booked out in winter and northern locations are booked out for the summer ahead. As for a booking in a seasonal holiday favourite such as Rottnest or Coral Bay – well good luck finding a spot.
Perth rental market
REIWA members reported there were 2,879 properties for rent in Perth at the end of this week.
This is five per cent lower than levels seen four weeks ago and 53 per cent lower than levels seen a year ago.
What happens next?
To be honest, we don’t know. Current conditions are almost perfect for local real estate. With Covid, border closures, global interest rates, US elections, tensions with China and more it feels like we are skating on thin ice. Property is best viewed as a long term investment and the long term view is hard to see at the moment.
How can we help?
If you are thinking of buying a property, we should be discussing risk management, ownership structure, negative gearing and your future plans well before you make an offer. You can Contact Us to talk further.