Skyrocketing Perth rents a blow for tenants, boon for investors

Dwelling values more than exceeded expectations in Perth over the course of 2023 and are tipped to continue skyrocketing in 2024 but what is happening in the rental market?

Affordability overall across the country has put downward pressure on the speed of rental growth recently, but since Covid, rental values have grown 30.4 per cent higher.

Perth rents have soared by 15 per cent year-on-year from $480 to $550 per week, which is driving rental income up for investors contending with higher interest rates.

Perth offers something for everyone with low entry price points, strong rental demand and rental growth. It also has a great work and lifestyle balance for families, migrants and retirees.

In the rental market, the median dwelling rent fetches roughly $604/week - a 13.2 per cent increase over the past 12 months.

But for investors, its vacancy rates remain extremely low and continue to appeal to investors.

Perth has one of the lowest vacancy rates in the nation at 0.5 per cent.

Its rental yields have also increased to 4.72 per cent according to CoreLogic.

Without a doubt, however, investors are enjoying much higher rental yields than the average.

Suburbanite recently purchased a Wanneroo house for $515,000. The home is rented for $560/week attracting a 5.7 per cent return.

When looking at the 12 months change in rental rates, Perth leads the country in both the housing and unit market, recording a 12.7 per cent growth for houses and 16.2 per cent growth for units.

Perth’s relative affordability

Home values overall in Perth are significantly lower than Australia’s most expensive cities, offering renters a more affordable option and investors a sweet spot.

Perth’s most expensive suburbs for house renters include Mount Claremont ($1,308/week), Dalkeith ($1,285/week) and City Beach ($1,212/week).

Perth renters can snag a house bargain in Medina ($463/week), Calista ($470/week) and Mandurah ($472/week).

Renting in Perth’s Applecross will set the budget back a median of $898 but digs deep into the pocket with a median house price of $1,886,738.

This is where rentvesting could be a solid option to getting into the property ladder sooner

Keep in mind, Perth did not peak at the same time as other markets, predominantly in the first quarter of 2022, hence it is likely to continue accelerating in 2024 as the national property price growth rates ease.

Fortunately, Perth is underpinned by strong employment growth, housing affordability and strong rental returns.

This should shield it from any aggressive measures by the Reserve Bank of Australia in 2024.

Regional Western Australia was also seeing strong demand for established homes, which was putting upward pressure on prices and rents.