Quarterly Market Report: Perth Property Investors

2019 was a year of mixed results for Perth real estate.

We take a look at what investors and landlords should know about our city’s property market as we enter 2020.

Perth sales update

Broadly speaking, 2019 was another subdued year for Perth property sales. Stock levels were low and, with the resources sector still employing fewer people than at its 2013 peak, so too was consumer confidence.

This meant that, here in the West, we did not see the same flow-on effects that low interest rates and better lending conditions brought to the major cities of the Eastern States.

While some properties registered capital gains over the past 12 months, these tended to be concentrated at the higher end of the property market, with some affluent suburbs such as Applecross and North Perth finishing the year strongly, according to REIWA figures.

That said, Corelogic data does show an improvement in the rate of decline across the Perth property market as a whole. This suggests it may have now reached the bottom of a long downturn and that 2020 could be the year we start to see it rise once again.

For the moment, however, Perth has the lowest median house value of any major Australian capital city, at $479,000. This means that for investors looking to the long term, there is the opportunity to buy quality property in great locations at a good price – something that isn’t the case in most other capitals.

We expect investors to notice this and to capitalise on the value in the Perth property market over 2020.

Our view is that investors chasing high yields should think about buying in suburbs in lower price ranges, like Armadale, Butler, Camillo, Chidlow, Coodanup, Coogee, Cooloongup, Kwinana, Leda, Mandurah, Orelia, Parmelia, Stratton and Yangebup. Data from Herron Todd shows that these suburbs are currently producing Perth’s best income returns, well above prestige suburbs like Applecross, Cottesloe, Dalkeith, Mount Pleasant, Peppermint Grove, Shelley and Swanbourne, all of which registered yields below 2%.

Greater Perth median house price in December 2019: $479,000

Perth rentals update

On the whole, Perth’s rental market performed more strongly than its sales market over 2019.

The city’s median rent has been steady at $350 a week since 2017, even in the face of declining property prices. This means yields have been slowly rising. For instance, rent of $350 a week on a property valued at $350,000 is a yield of 4.55%; on a property worth $450,000 it is 4.04%.

Our 32-month run of static rents is notable as the longest period of rent stability Perth has experienced since REIWA first started recording rental data in 2001.

Overall, in 2019 we saw the rental market tighten thanks to several factors. We had good leasing activity levels, less new build stock coming to market, declining listings and a vacancy rate that had fallen to 2.3% by November.

If these conditions continue, we expect the median rent may eventually rise in 2020.

Perth median rent December 2019: $350 per week

What Perth landlords need to know right now

As we head into 2020, we notice that tenants remain price sensitive. The suburbs doing well right now are those located near good or popular schools, the beach, or infrastructure and transport. Access to NBN is also high on tenant wishlists.

Unsurprisingly, homes that are well maintained, cared for and appealing are in high demand no matter where they are located.

Victoria Park is currently very popular with renters, as is Applecross and the surrounding areas of South Perth, Willetton, and Rossmoyne. We’re also seeing inner-city units rent well.

Although vacancy rates are beginning to shrink, landlords should always appreciate the value of a good tenant, and shouldn’t become complacent. It’s usually far better to hold onto a good tenant and avoid a potential vacancy than to increase the rent when the market won’t bear it or fail to deal seriously with tenant concerns. Here, an eye on the bigger picture is always key.

That said, with the market tightening, we expect competition to increase and we’re quietly optimistic that gradual rent increases will become possible in the Perth market over the coming year.

If you’re looking to rent out your Perth investment property in 2020 contact the Rentwest specialist property management team today.

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