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Perth Vacancy Rates Are Up, But Sales Times Are Down

Perth’s tight rental market has been making headlines for some time, with many people beginning to wonder whether our city is facing a full-blown housing crisis.

However, in good news for tenants, the rental market may be easing, with the vacancy rate rising over July 2023, for the first time in six months. As this happens, however, the sales market seems to be becoming more competitive, with the median property now selling in just 12 days, according to REIWA.

So, are the two related? And what’s driving these dynamics?

Perth’s ultra-competitive rental market

More than a year ago, in May 2022, we wrote about a potential rental crisis taking place in Perth. There was little stock on the market and intense competition for any good properties that were advertised. Renters were finding it exceptionally challenging – and sometimes almost impossible – to secure a property.

At the time, we noted that the city’s vacancy rate had not been above 1.2% since mid-2020.

In the 16 months since then, little seemed to change. The vacancy rate has been well below 1% for most of this year, dipping as low as 0.6% in January 2023, its lowest level in 42 years. Then it stayed at 0.7% for the next six months.

But by mid-2022, it seemed that the market may have been turning. In July, REIWA recorded our city’s vacancy at 0.9%. That may still seem very tight, but it’s a step in the right direction and reflects what we’re seeing on the ground.

We’ve noticed that, while the number of people searching for a rental home remains high and open homes are busy, tenants noticeably have more choices than they did just a few months ago.

Is the sales market now taking off?

At the same time, we’ve seen another trend emerging: the sales market is becoming even more competitive. ‘Days on market’ – or the average time that a property is advertised before selling – are lower than they have ever been.

In June 2023, it took an average of just 10 days to sell a Perth property, according to REIWA. That’s the fastest time on record. In areas such as Greenfields and Parmelia, it took just three days.

This shows an incredible level of demand among buyers, where people are offering – and trying to secure a property – almost as immediately as they see one that’s suitable.

The heat in the sales market is also starting to be reflected in property prices. The citywide median price lifted 1.0% in the month of July, according to CoreLogic and 3.2% over the quarter – taking the citywide median property price to just under $600,000.

So why is this happening at the same time as the rental market may finally be easing?

First home buyer activity on the rise

One of the key influences in the Perth property market right now is the number of first-home buyers.

ABS data shows that 34.6% of all home buyers in the WA market are buying their first home. There are also roughly 20% more first-home buyers in the market than in early Autumn.

This is creating genuine competition in putting real pressure on entry-level properties and suburbs popular with first homeowners.

Many of these first-home buyers are finding that it is more expensive to rent than in buy in most Perth suburbs. They’re also taking advantage of the first homeowner subsidies, exemptions and discounts to get onto the property ladder for a lot less.

Established properties in demand

For a long time, the trend for many first-home (or next-home) buyers in Perth was to build their own home. An interesting aspect of today’s market is that it is established buildings that are in greater demand.

Rising construction costs and growing concerns about long commutes mean that many first-time buyers are looking closer to Perth’s CBD to secure their home. We expect that over the next couple of years, this will drive activity in inner- and middle-ring suburbs close to good transport links and amenities.

We also expect to see the continued gentrification and reinvention of many suburbs with good housing stock.

Investors looking to the West

It’s not just first homeowners influencing prices at the moment. There has also been a rise in the number of investors – especially interstate investors – entering the Perth property market.

These property investors are looking to take advantage of Perth’s exceptional yields (currently averaging 4.9% across the city, and 6.5% for apartments, according to CoreLogic), as well as the potential for capital growth.

As they acquire more properties, it also means more supply is gradually coming to market – and this is helping ease the vacancy rate.

What this means for Perth property investors

If the rental market continues to ease and the sales market tightens further, it’s likely to mean two things. First, Perth’s skyrocketing rents are likely to stabilise as the balance of power shifts towards tenants.

On the flip side, however, it’s likely to mean that sales prices will rise, and property investors could experience some strong capital growth.

Want more?

If you’re looking to invest in Perth real estate, rent out your Perth property or find your next Perth rental home? We can help. Get in touch with our specialist Perth property team today.

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