The COVID-19 pandemic has had a huge impact on many aspects of our lives.
It’s also caused changes to the property market across the country. It has had a practical impact on things like how auctions and inspections are held, but also an economic impact by lowering stock levels and changing the rental market.
So, where is the Perth market at now and how have we fared during this uncertain and unprecedented time?
The immediate impact
Once the economic ramifications of the pandemic hit our shores, financial support was available for tenants and landlords who needed it from the Government or lenders. Some things changed quite quickly. Landlords had to adhere to the Commonwealth government’s six-month moratorium on evicting tenants who don’t pay rent, and there was a ban on increasing rents, which has recently been extended until March 2021. Landlords who were themselves economically impacted by COVID-19 were able to apply for assistance from their lenders. Meanwhile, tenants suffering from financial hardship were able to apply for grants of up to $2,000 via the WA Government’s Residential Rent Relief Scheme.
The real estate industry also had to learn to do things differently. COVID-19 changed the very way that real estate operates, with early restrictions fast tracking technology such as online auctions, electronic contracts and private inspections via video streaming.
While most restrictions have eased in WA now, social distancing is still required at auctions and inspections, and we expect that some of the tech changes will remain. Technology can provide a COVID-safe way of inspecting rentals and buying and selling property, particularly for those at high risk.
The reality of the rental market
According to a report by the Real Estate Institute of Australia (REIA), published in September 2020, rental housing nationwide is the most affordable it has been since 2007. Realestate.com.au reports that the dynamic has shifted in favour of renters, thanks to reduced rental demand. With eviction bans for those impacted by COVID having run out, the rental market could be in for more turbulent days ahead.
However, the Perth rental market has held up well comparatively, with CoreLogic data showing it to be the only capital city in Australia to record growth in rents over April. Despite initial concerns, we didn’t end up seeing a huge demand for rent reductions. REIWA data shows that just 1% of the 160,000 private tenancies in WA had been unable to meet their full rental obligation and rental arrears are at record lows.
As of August, the vacancy rate has shrunk to 1.3%, and the overall Perth median rent sits at $360.
How the Perth property market is faring
The Perth property market remained remarkably resilient in the first half of 2020, even rising slightly in April, largely due to low stock levels in the market. Perth had seen property sales sitting at between 700 and 750 per week before the pandemic, dipping to as low as 280 per week in mid-April. However, the metropolitan area is now seeing record sales that have not been seen since 2015, at over 1,000 per week.
Again, despite initial concerns, Real Estate Institute of Western Australia (REIWA) president Damian Collins said the median house price in WA had largely held firm throughout the coronavirus period. He was quoted by the ABC as saying the Perth marketing was already recovering pre-COVID, and so COVID simply delayed that for a couple of months.
Record affordability, along with government incentives, contributed to the buoyant sales market. And the Perth median house price remained stable at around $475,000 throughout the worst of the shutdown in WA.
The bigger picture
In March, the Reserve Bank of Australia (RBA) announced an unprecedented stimulus to help support businesses and households through the economic downturn caused by the coronavirus pandemic. The RBA cut the cash rate cut from 0.75 per cent to 0.25 per cent, along with a commitment to not increase it until the economy has clearly recovered. This gives mortgage holders, including investors, a genuine saving if their lender has passed even some of this on to them.
REIA president Adrian Kelly said in a recent statement that while there has been an impact on property prices across the country, it has been relatively modest and not been the doomsday prophecies that some commentators initially expected from COVID-19. He expects to see continued stability in the market.
Many hope that the WA economy won’t be as badly impacted by COVID-19 compared to the service-industry-reliant economies of the Eastern States. This, combined with record low-interest rates, means there’s even some optimism that Perth could potentially outperform other capital cities over the next 12 months, which hasn’t happened in a decade.
If you’re looking to invest in Perth’s property market contact our specialised team of property managers today.