Perth rents drop due to high stock levels
Of all the capital cities, Perth is in the unfortunate position of having the lowest rental returns. Worse still, those returns are slipping month on month, driven by low demand and increasing supply.
According to CoreLogic, Perth’s performance over the past year suggests that the capital is undergoing its weakest annual change in recorded rents. Property values have also dropped, while sales volumes appear to be stabilising.
With overall rents falling in recent months, it’s the tenants who have the upper hand in this market. They can enjoy increased affordability in the local property scene, which spells bad news for landlords. Figures from the Real Estate Institute of WA (REIWA) show that the average vacancy rate is alarmingly high at over 6%.
Nonetheless, REIWA maintains a spirit of optimism in the face of this development.
“Perth’s Northeast subregion was the standout performer in the Perth rental market in this quarter, recording a 4.7% increase in leasing activity. We also saw signs of strength in the Southwest subregion, with activity lifting 0.2%,” reports REIWA president Hayden Groves.
Bucking local market trends, 30% of the suburbs in the Central subregion still reported either higher or unchanged rates, Groves says, suggesting that these areas remain good options for investors.
He adds that first home buyers from WA made up 15% of all first home buyers in the country – the largest proportion of all the states – during the June 2016 quarter.
Upward trend in rentals
Perth’s rental market “has certainly presented challenges for investors over the last 18 months”, Groves states, “so it’s a good sign that in August there was an improvement in listing levels and a notable increase in activity”.
The Central subregion of Perth, which reported an 8.5% decline in leasing activity back in the June 2016 quarter, recorded a 19% increase in activity in August 2016. The Northwest area also experienced over 17% growth.
“We’ve seen a clear upward trend in leasing numbers across Perth,” Groves adds.
“Although Western Australia’s population growth has slowed in recent times, there has been a small lift in overseas migration into the state. This, combined with improved affordability in the rental market assisting tenants who are house sharing to move out on their own, has contributed to an increase in leasing activity.”
Perth tenants certainly have plenty of choice in the market and are in a good position to negotiate with landlords over price and lease terms.
Buyers covet houses with a view
Rent.com.au reports that WA showed the lowest number of listed apartments in the third quarter of 2016 – likely avoiding the threat of oversupply that is plaguing other states. This state has the highest concentration of houses at 76%.
According to Herron Todd White, the most popular property types in the state currently include timber-clad pole homes, which are located on steep, sloped land allotments and provide excellent views of the Perth coast, the CBD and the Indian Ocean.
Prices are typically dependent on property size and quality, as well as on the view. On the whole, such homes are considerably more expensive than typical brick-and-tile properties, with those in Lesmurdie commanding around $1m.
The house market in the suburb of Kojonup has been experiencing growth over the past year into the August 2016 quarter.
Situated about 30 minutes from the town of Katanning, Kojonup is a tourist destination that emphasises the history of its original Aboriginal residents– hence, it features many sporting, recreational and cultural sites. It is also quite affordable as the median house price falls well below the WA average at $222,500.
SUBURB TO WATCH
Fremantle: Port-side suburb unit market stays steady
Located within Perth’s popular port city, the suburb of Fremantle has been hanging on despite WA’s troubles in the property market. In fact, its unit market reported only a slight drop of 0.6% over the past 12 months. Rental yields are reasonably high at 4.5%, which is favourable for investors.
Fremantle is close to beaches, dining establishments, pubs, clubs, cultural centres and markets, so its residents are certainly not lacking in terms of amenities.
It is also known for its 19th century architecture; in fact, limestone row houses (valued at under $1m) are typically in high demand, according to Herron Todd White. The same is true for warehouses that have been converted into both basic and luxury homes, priced at under $500,000 and over $1m, respectively.
Fremantle is only approximately 30 minutes from Perth, making it an ideal retreat for city dwellers who need to get away and see some sun and shore after a long day. There are daily bus services to the capital and back.