Perth Rental Market Update

For the past 12+ months Perth has been experiencing a rental shortage on a very large scale.

The vacancy rate is sitting at 0.6% according to REIWA, the lowest figure on record since records began in the early 80's.

At present there are around 1,600 properties listed for rent in the Perth Metropolitan region.

Looking back to 2017, which was arguably the worst period for investors, vacancy rates were as high as 7.3% with as many as 11,000 properties available.

The extreme shift in the rental market seemed to happen somewhat unexpectedly and moreso suddenly in the first quarter of 2020.

With the emergence of COVID-19 and the initial panic of what the implications would be in Australia, one may have expected a total collapse in the rental market.

I am sure few are keen to relive the past, so I will skip the negativity and focus on the by-product of 2 years of 'drama'.

Having emerged relatively financially unscathed, coupled with the perception of being a COVID safe haven and experiencing a resurgence in minerals and resources, Western Australia seems to be THE place to be.

Investment owners in Perth were once the victim of a 'perfect storm' (low interest rates making home ownership easier, downturn in resources, outgoing population). There has been a sharp about-face and the property market is soaring as a result of a reversal of fortunes in three key areas.

With interest rates rising fast in 2022, borrowing capacity for tenants (would be home buyers) was reduced which seemed to keep many in the 'rent-trap'.  These tenants were forced to compete with thousands of new migrants into WA, many of whom are chasing fortune and glory in the far reaches of the state, driving up rental prices (often above mortgage repayments, ironically) in the metropolitan region.

It is not uncommon to see 20-50 people lining up to view a rental property nowadays. Some have been viewing 20+ properties before finally getting off the 'conveyor belt'.

As a move of desperation (or frustration) people are over-bidding the asking price in the hopes of being selected as the successful tenant. On numerous occasions, I have seen offers tendered more than $100 above the listed price!

I will refrain from offering an opinion, though I will say I do have empathy for tenants caught in this predicament.

People purchase properties for wealth creation. I cannot ever recall encountering a client whose childhood dream was to play 'house' by being somebody's landlord.

After a very long period of financial hardship for many investors, I am delighted for them that things are finally breaking their way.

I say this, in the knowledge of the sacrifices many have made to either obtain or more pertinently retain their properties in hard times through the 2010's.

I have noticed many are vocal in criticising 'greedy' landlords. Were these people equally as vocal to thank landlords when their rent was (market adjusted) reduced when supply was higher?

Rents are set by supply and demand. Currently supply is very low, and demand is the fiercest I have ever experienced (more so than my time in London).

Perth is currently one of the cheapest capital cities in Australia to purchase property in. Many investors from over east are snapping up properties in WA as they are afforded better value for money and very attractive yields.

At the time of writing this piece, I am working with clients in Saudi Arabia, Dubai, Adelaide, Sydney  & Kalgoorlie who are all looking to expand their portfolio.

Higher interest rates are offset by climbing rents, which nullifies the differential. Interest rates will always fluctuate , property prices rise and fall on an upward trajectory.

In my opinion, it is a great time to be an investor in Perth. With so many people across the globe seeking to stake a claim...Get in and get in fast.

Rob Woolmer 

Head of Property Management

THE CONTESSI GROUP