Perth's rental market has tightened significantly in recent months, with fewer than 2,000 rentals on the market in any given week at the moment.
The current conditions aren't too far off from the rental crisis we saw at the height of COVID, when the vacancy rate consistently sat at about 1%. REIWA considers a balanced market to be between 2.5% and 3.5%.
For the record, Perth's current vacancy rate is 1.7%.
While rents in Perth have stayed fairly flat over the past six months, if the current conditions persist, we can only see prices going one way – up.
See also: Rental yields hit 11-year high as home prices fall
What we're seeing firsthand on the ground
The stats confirm what we've been seeing firsthand. More people are attending rental openings compared to six months ago.
One recent Rent Choice listing, a 4x2 house in Scarborough, had 30 groups through it.
It's not just happening at the lower price points either, with strong competition at the higher end of the market too.
Renters are also getting creative to secure a home.
We're seeing more applications from mixed families, such as two single mums and their children sharing a home.
On the supply side, we're also seeing limited new stock come to market. In a typical month, the Rent Choice portfolio has four to eight new builds available for lease but right now we have none in the pipeline.
Another telling sign is how rentals are being leased.
When advertising, we provide a price range, for example from $650 to $720 per week. Rewind six months and most applications came in at the lower end of that range. However, more recently we've noticed applications coming back at the higher end.
A perfect storm creating a rental supply crunch
The crunch on Perth's rental market is a combination of several factors.
First, rising interest rates and changes to negative gearing and capital gains tax have deterred new investors from entering the market.
See also: What a 4.85% cash rate means for property investors
Second, many existing investors have been selling. The reasons vary, but the main feedback we hear from clients is a desire to cash out amidst high property prices, along with concerns about the Federal Government's tax changes.
Third, Perth's notoriously slow residential building sector has hit another setback: a brick shortage.
The state's major brick supplier has put builders on rations. This has led the WA state government to kick in $4 million to restart a mothballed site, but that won't be operating until at least March next year, and even some builders question how much relief it will provide.
What does this mean for Perth rents?
While the sales market is softening after several years of intense conditions, the same can't be said for the rental market.
We're yet to see Perth rents take off again, but if these conditions persist, we expect prices for houses and apartments to start rising in the short term.
As always, it's critical to price your rental in line with the local market, taking into account the property type, age, location and supply within your suburb.
See also: Why the Perth property market remains resilient
Image by Vitaly Gariev on Pexels
