Perth’s rental market remains incredibly competitive as we enter the second quarter of 2022.
We look at what’s happened in the market in the first quarter of the year and what we can expect next.
Perth house rents continued to rise in the March quarter, jumping up 4.3% to reach $480, only $10 below the all-time high reached in 2013. According to Domain, they are now 11.6% higher than they were 12 months ago. Meanwhile, unit rents, now $400 per week, have hit their highest point since 2014. They rose by 2.6% over the quarter and 8.1% over the last year.
While this might sound like good news for landlords more than tenants, it’s worth noting that Perth rents are still some of the most affordable in Australia. Melbourne and Adelaide are the only capital cities with cheaper median house and unit rents. Meanwhile, CoreLogic reports that Orelia in southern Perth is home to Australia’s most affordable median rental units at $268 per week.
Historic low vacancy rates
Domain reports that national vacancy rates fell to the lowest on record in March. They are at a historic low here in Perth too. REIWA figures show the Perth vacancy rate was 0.7% in the December 2021 quarter. According to Domain, they fell to 0.6% in January, only to fall again to 0.5% – a new record low – in February. Perth vacancy rates remained historically low at 0.5% in March.
Rental home demand greater than supply
As the incredibly tight vacancy rate indicates, demand for rental homes continues to outstrip supply. Domain reports there are currently 19% fewer advertised rental properties in Perth than a year ago. At the same time, more residents looking for housing are flowing into Perth now that our borders are open once again. After years of losing residents to overseas and interstate migration, Perth recently hit an eight-year high net gain of residents arriving in our city.
Investors take note – Perth is currently offering the second-highest yields in the country after Darwin, according to CoreLogic. Perth yields are now 4.34%, only down six basis points from 4.40% a year ago, following annual housing growth of 10.6% and annual rental growth of 6.6%. This is the smallest change year-on-year of all the Australian capital cities.
Positive investment conditions
It’s a great time to invest in Perth property. When compared to other markets around the country, Perth yields are high, property values are relatively affordable, and vacancy rates are incredibly low. Even though Perth’s home values have risen 21.6% since the start of the pandemic, according to REIWA, CoreLogic reports that the WA housing market remains the most affordable in the country. And with REIWA predicting a further 10% price growth in 2022, there’s plenty of opportunity for capital growth.
What can we expect next?
The trends we’re seeing at play in the market now – strong demand, slow supply of new rental homes, low vacancy rates and rising rents – are likely to continue as 2022 goes on.
Given their recent trajectory, Domain predicts Perth house rents to hit a new record this quarter. With the state unemployment rate sitting below 4% and jobs growth rising faster than any other Australian state or territory at 6% per annum, interstate migration to WA is set to rise as workers come here for the jobs. This will, of course, increase demand for rental housing, continuing to drive vacancy rates down and rents up.
What does this mean for tenants looking for a Perth rental home? As REIWA’s Damian Collins says, “we are hopeful more skilled workers will be attracted to the state to help complete construction and create new housing.” We’re also hopeful more property investors will take advantage of the excellent opportunities currently presented by Perth’s market conditions, thereby adding more rental stock to the market.
If you’re thinking about investing in Perth property, searching for a property management team to look after your Perth investment, or searching for your new Perth rental home, get in touch today.