Punters pouncing on Perth property

The tide continues to turn for Perth property, with prices rising to mid-2006 levels, rents the tightest among Australian capitals, and properties selling at their fastest pace in a decade and a half. 

The latest Real Estate Institute of WA data shows properties are selling in the fastest time in 14 years. Homes took a median 22 days to sell in November, 17 days less than the same time last year and the quickest since September 2006.

Since the onset of COVID in March to the end of November, house rents in Perth have risen at a faster rate than anywhere else in the country, going up 6.6 per cent, with units at 3.9 per cent.

Regional Western Australia has not been left out of the recovery either, with rent prices for units in regional WA growing at a faster rate (6.9 per cent) than anywhere else in the country and house rents up 4.2 per cent. 

Property prices have also begun to reverse an annual fall of 4.8 per cent – the worst in the country – to record a heartening increase last month of 1.1 per cent.

Paul Niardone, managing director of The Agency, said all the ingredients for an upturn in Perth were in place.

“We are certainly bullish on the WA market but we must remember that Perth is coming off a low floor, with values more than 20 per cent down of their peak in 2014 and the market had seemed to have bottomed out and was starting to turn prior to COVID-19,” Mr Niardone said. 

“Post COVID-19, at a macro level, we have seen record low borrowing costs, and unprecedented levels of government incentives and infrastructure spending to stimulate the economy and create jobs, which is reducing fear in the market.

“Combine this with low stock due to people returning home seeking a safe harbour and others sitting tight, in addition to having a mining industry holding strong and expanding, and the scene is set for a rising market,” he said.

REIWA’s 2021 outlook indicates the Western Australian property market should experience steady growth in both the rental and sales market - something not seen since the strong conditions in 2013.

“Sales activity in Perth at the start of the year was sitting at approximately 2,900 transactions per month followed by an uptick where we are now seeing nearly 4,200 transactions,” Mr Collins said.

“Listings for sale have reached a 13-year low with just over 10,000 listings for sale on reiwa.com, putting upwards pressure on prices.

“While house prices were largely stable over the last 12 months, it is expected prices will increase between six and 10 per cent over the next 12 months.”

Market movers

The prime, or affluent, property market has shown more resilience than other price ranges during the pandemic across Australia, a situation likely to continue. 

But other parts of the market are also enjoying a recovery as rising rents push people into the market and pull in investors chasing the higher rental yields. 

Peter Trifunoski, director and licensee of GEST Real Estate, said the market recovery was happening across the board. 

“It’s difficult to find any negative aperture - years of an oversupply of apartments seems to have turned around and vacancy rates are extremely low, development sites are being purchased by builders quicker than ever,” he said.

“Any property that has a ‘build and retain’ opportunity seems to be growing at an extremely fast rate.”

But the prime market still offered particularly enticing buying opportunities, he said.

“As has been made even more evident in 2020, the gap between low-middle-high income earners seems to be growing as Covid-19 affected lower income families more than higher income families, which has an impact on property values in their respective markets,” Mr Trifunoski said. 

“The prime/affluent property market is as undersupplied as the property market targeting first home buyers.”

Mr Niardone said housing was still proving a stronger performer than apartments, as there had been a strong push for construction of new builds and first homeowners’ incentives.

“What is different is that we have not seen the slow rise from the lower end of the market stimulating the level above as people trade up.”

“This has been across all market sectors, as people take advantage of cheap money and a cross section of expats returning”.

He said the only potential headwind he could foresee was a reoccurrence of COVID-19.

Jennifer Wakeman, general manager of Momentum Wealth, said buyer’s agents had been witnessing heightened competition over the past few months.

“The lack of stock on the market is leading to high-quality properties selling extremely quickly and this is especially true for tightly held and established suburbs where owner-occupiers, and recently investors, are competing to enter the market,” Ms Wakeman said.

Rental market

Despite an expectation that rents will grow an additional 10 to 15 per cent throughout 2021, WA is still the most affordable capital city to rent in across all Australian states and territories.

For those looking for rental properties, the market has reached crisis levels, with the vacancy rate reducing to below one per cent due to the flow on effects of COVID-19.

The limited stock of rentals available has resulted in an upward pressure on rents with the median rent increasing from $350 to currently sit at $380 per week in the last few months, an 8.5 per cent increase.

“Population growth increased 1.5 per cent during the 12 months to March 2020 and with more than 1,000 international arrivals expected per week, plus the domestic borders opening (on 8 December), the rental market could get more competitive for renters at the start of the year before it gets any better due to the low levels of available rental properties,” Mr Collins said.

Regions digging some growth

REIWA expects the overall market conditions to improve in regional WA during 2021 as a direct result of population growth and change in lifestyle preference due to the COVID-19 pandemic and general market conditions.

Mining, as is so often the case in WA, is the main driver. 

Major mining centres have experienced significant gains during the latter half of 2020, with increased rental demand and sales activity.

“The stimulus with the strong mining industry is seeing mining centres like Kalgoorlie, Karratha and Port Headland record higher sales prices and a very tight rental market,” Mr Niardone said.

“We have also seen tourist towns across the state see a spike as people who fear lengthy travel restrictions buy holiday homes, as well as many people changing to remote working arrangements on a permanent basis.”

According to reiwa.com data, at the latter end of 2020, Albany’s vacancy rate dropped from 0.9 per cent to 0.4 per cent, Bunbury was down from 3.1 per cent to 0.7 per cent and Geraldton was 5.1 per cent to now sit at 1.5 per cent.

“While decreases in rental stock can be explained by higher population growth and low investor activity, it will be interesting to see how working from home impacts lifestyle choices and if we see an increase in demand for regional properties in 2021 due to people opting for an alternative lifestyle while working from home,” Mr Collins said.