Recent REIWA data tells an interesting story about how the Perth property market has performed over the past five years – one that’s not necessarily in line with media reports about how our city has been faring.
We take a look at the story behind the figures, including COVID-19’s impact on the Perth property market.
1. Sales are improving: Perth’s median property value
While it’s true the property market has been sluggish over the past half-decade, the good news is that the median house price is back in line with where it was in late 2016. According to REIWA, Perth’s median property value now sits at $520,000, after dipping as low as $475,000 in the June quarter of 2020.
What’s different between now and late 2016 is that the volume of sales is considerably higher – rising by about 2,000 listings.
From 2016 through to mid-2020, sales volumes for houses hovered around 5,500 to 6,000. Then, in the third quarter of 2020, sales volumes made a big jump and, ever since they have been consistently between 8,000 and 9,000 properties a quarter.
It’s notable that this increase in volume, or sales activity, corresponded with the end of the first phase of the pandemic when the economy moved ahead strongly and it seemed clear that our State would be spared the worst of COVID-19.
The property market always operates on the laws of supply and demand and the good news is that this increase in supply in the form of more houses hasn’t caused prices to drop. In fact, it’s had the opposite effect: price growth has continued to rise as more properties have sold.
While we can see similar patterns in the apartment market, it’s a slightly different story for the median unit price. Perth units have not yet hit the peak they saw in the first quarter of 2017 when the median apartment value was $419,500. But, like sales volumes, they have been on an upward trajectory for the past 12 months. The median value hit $406,800 in the third quarter of 2021 after a low of $375,000 in the second and third quarters of 2020.
It’s also worth noting that, for the past 18 months or so, apartment price growth has lagged behind house price growth all around the country.
2. A market speeding up: Median selling days falling
The number of days it takes a property to sell, or the median selling days, has practically halved for Perth over the past five years.
The median days on market grew from 39 in late 2017 to a high of 59 in the first quarter of 2019. That meant it took almost two months longer to sell the average home.
Since then, median days on market have been steadily falling. They now sit at around 20 days, or just shy of three weeks. This indicates there is far more action in the property market than there was pre-pandemic when properties were taken twice as long to sell.
When it comes to rental listings, it took a median of 17 days, or just over two weeks, to lease a rental property during October 2021. That’s on par with this time last year.
3. Rental market tight: Perth vacancy rate halved
The REIWA data clearly shows the rental vacancy rate tightening too. The vacancy rate is now less than half of what it was before COVID-19 hit.
Pre-pandemic, the Perth-wide vacancy rate was sitting around 2.4%. By the June 2020 quarter, it had slid a little to 2%. However, the following quarter it halved to 0.9% and it has remained there over most of 2021.
What this tells us is that rental properties are in consistently high demand – great news for investors but also perhaps a driver for potential first home buyers to leave the rental market and get their foot onto the property ladder.
4. Yields increasing: Median rents going up
As you may have expected, the substantial fall in vacancy rates has been driving up median rents.
Since the pandemic hit, the median rent for a Perth house has increased from $370 to $450 a week, and the median rent for a unit has climbed from $335 to $400 per week.
This represents a growth of 21.6% for house price rents and 19.4% for apartment rents.
In some areas, and for some property types, rents have risen by much higher percentages.
While that has been welcome news for landlords, tenants have struggled to compete in some market segments thanks to the perfect storm of competition and price rises. And this has led to concerns over rental stress, and rental affordability.
However, as the data also shows, many believe rents had a bit of catch up to play, having been fairly stagnant since the mining boom came to an end.
5. A good return: Market conditions favour property investors
REIWA President Damian Collins said at the beginning of November that ‘the biggest issue facing the Perth rental market is … a shortage of rental stock.’ He forecasts this may become even worse as demand for rentals will likely only increase when our state borders open next year.
As this happens, Damian says an influx of investors is actually needed to ensure there will be an adequate supply of rental stock.
We agree that with vacancy rates at historically low levels, now is an ideal time to invest in Perth residential real estate or to list your Perth property for rent.
Contact our specialist property management team for advice about listing your rental property today.