Steam coming out of Perth's rental market

Perth’s rental market is showing signs of changing after several years of strong growth and low stock availability.

The city is now seeing rents stabilise and the tight vacancy rate loosening.

The changing landscape has repercussions for investors, but an understanding of local conditions can ensure long-term investment success.

Perth’s median rent prices for houses have held steady at $650 per week since March 2024. The median weekly rent for units has been $600 per week since March, rising to $620 in July, before dropping back to $600.

Property investors need to factor in changes

Investors need to speak to their property manager about the market conditions in their area so they can price their property appropriately.

When renewing a lease with an existing tenant, any increases to the rent are unlikely to be at the same pace as in recent years.

If seeking a new tenant, it is less likely that tenants will offer significantly more than the asking price to secure a property.

Recent changes to legislation in Western Australia mean rents can only be increased once every 12 months. There are a few nuances to the legislation, for example if you increased the rent at a six-monthly review in June, you cannot increase it again when the lease comes up for renewal in December.

Vacancy rate easing

Perth’s vacancy rate rose to 1.4 per cent in August 2024 after more than two years at less than 1 per cent. The last time the vacancy rate was above 1 per cent was June 2022, when it was 1.1 per cent.

Further easing of Perth’s rental vacancy rate is expected over the remainder of 2024.

The changes are a result of changes in demand and supply.

The nature of demand has changed as tenants seek to cope with the growth in rent prices and the challenges of finding a rental.

There has been an increase in tenant household sizes as people share the cost burden of renting. People are also choosing not to rent if possible, either buying or returning to the family home.

Supply has been slowly increasing as completed investor-owned new builds come to the market. Some tenants are also having their long-awaited new homes completed, allowing them to move out and free up some established homes.

While the frenzied conditions of the past few years have eased, the market remains fairly competitive, however, this is likely to change as supply continues to increase.

Investors need to be aware of these changes and ensure they remain competitive in terms of price and the appeal of their property.

Rental yields trending downwards

Perth’s property prices have risen strongly over the past 12 months, which is good news for existing investors, but the emerging stability in rent prices means yields may decline slightly for those looking to enter the market.

Despite this change, Perth remains an affordable option for investors, particularly those on the east coast, and there are still opportunities for strong returns.

The key is to arm yourself with local knowledge so that you can buy, or build, wisely. Ensure you buy in areas that are in demand and that you buy/build properties that will appeal to tenants.