Healthy market booming
WA’s tight rental market is encouraging first home buyers to snap up properties in the $400,000 to $600,000 price range
Unit rental prices in Perth continue to trend upwards, recording strong results across the board in the June quarter, Australian Property Monitors’ (APM’s) latest Rental Price Series Quarterly Report shows.
Perth was the only capital to record growth in house rents over the quarter, up by 1.0%, and unit rents rose sharply by 6.3%. The city’s current median asking price of $425 weekly for house rentals is closing in on Canberra’s median of $500, and this is set to soon become the most expensive major capital city for tenants.
APM senior economist Andrew Wilson says the trend in evidence this year has continued as rental prices for both houses and units have skyrocketed in Perth. “Affordability constraints in the market are motivating tenants to gravitate towards cheaper unit accommodation… The consequence of this is that the difference between house and unit rents is converging.”
Real Estate Institute of Western Australia (REIWA) president David Airey disagrees with reports claiming that the Perth rental market is tight and rents are going up. “Our data currently shows that there are now 4,200 rental properties on the market, which is a significant jump in recent times. We have gone from a tight vacancy rate of just 1.9% in December to 3.2% now, and that puts us above the long-term average,” he says.
REIWA data for the three months to May put the Perth median rental at $475 per week, up by $5 on the March quarter and generated solely by a modest increase for units and apartments alone – house rents didn’t move, Airey says.
The market should see a softening in rents for the second half of this year because of a slowing economy and strong first home buyer activity, he continues. “Our mining-based economy and its associated jobs is not as strong as it was last year. Separate to that, the significant number of first home buyers means that many tenants are leaving the rental system for a mortgage, thereby freeing up more stock back into the rental system.”
Real estate agents have noted a significant drop in the level of enquiries for rental accommodation and that long queues of prospective tenants at rental home-opens have vanished, Airey says.
Over the last eight to nine months rental vacancies in Perth have dropped to extremely low levels, and this has been coupled with strong rental growth last year and a stream of interest rate cuts, Momentum Wealth’s Damian Collins says.
“Tenants are thinking, ‘I can get a loan and buy a home, and it’ll cost me the same as renting’, so a lot of people are moving out of the rental market and into home ownership.”
This has led to increased buying activity in the $400,000 to $600,000 price range, and there is now a shortage of residential stock in this price range, he says. “A balanced market is considered to be 12,000 to 13,000 properties, but we’ve been at 8,000 listings. The sale market has been strong and there is a shortage of stock, so we’re expecting the market will perform well. It’s moved already, but we’re predicting 6–7% growth in 2014.”
A new RP Data report, which details almost 800 suburbs where rental returns are forecast to double in value over the next decade, backs this prediction up. Of the 800 suburbs, each selected based on their past performance, 181 are in WA.
WA property market at pre-GFC price levels
Meanwhile, a local expert says the WA property market has bounced back to pre-GFC property price levels in terms of both metropolitan and regional prices.
House + Home Loans managing director Rael Bricker says that house prices are rising steadily and generally exceeding 2006 levels.
He lists the four reasons for the market’s growth as increasing investor confidence, historic levels of rental yields, valuation firms’ responses to the increased values, and low interest rates.
Property investors are returning to the market and reaping the rewards, he says. “Investors are once again looking at property as a solid asset class. In comparison to other asset classes, such as shares which experience high volatility, investment property has proved its resilience through many areas of turmoil.”
The fact that the last six to 12 months of increased market activity is finally beginning to be reflected in the increased valuations on established dwellings, is also crucial to increasing investment, Bricker says.
Suburb to watch
Located just 8km from the Perth CBD, Osborne Park was originally market gardens and, perhaps because of this, was popular with Chinese and Italian settlers. Post-World War II it became a residential suburb, but by the 1980s it had morphed into a largely industrial area.
Altitude Real Estate’s Jo Femia says this means there is still a variety of industry and business located in the suburb. It also means there is a mix of amenities, eateries and retail outlets. “Businesses are always evolving or being introduced, and having such a large variety within close proximity is highly convenient. You wouldn’t really need to venture out of Osborne Park to fi nd anything.”
Typical properties include fl ats, villas and townhouses. “There are still the traditional homes on subdivisible blocks and these are very much in demand by developers,” Femia says. “Generally these properties are sought after (but not limited to) by fi rst home buyers/young couples and investors.”
Public transport is good, with both bus and train options, and there are freeway entry/exit points close by, she adds.
Osborne Park will always hold well in value because of its close proximity to the city, as well as the fact that shopping and nightlife options, educational facilities, the coast, and business options are all within a short radius, Feima says. “As dwellings closer to the city become less affordable, Osborne Park is seen as that next suburb with better value-for-money prospects.”
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