The Perth rental market has made national headlines this year.
It’s a hot market, with rising rents, low vacancy rates and a shortage of properties to rent.
There’s no doubt that we’re in the midst of a landlord’s market.
At Rentwest, we’re fielding plenty of tenant enquiries and have seen queues forming at open homes. We’ve also been seeing multiple applications for many rental properties – sometimes with prospective tenants willing to take a place sight unseen. Rental scams are on the rise and tenants are constantly asking us how they can secure a rental property.
But are we really in the midst of a rental crisis? We take a look at three indicators behind the headlines.
Rental prices: the reality
There is plenty in the media about rising rents and it’s absolutely true that rents are on an upward trajectory. However, a closer look at the data reveals there is more balance in the rental market than these headlines would make you believe.
For starters, rents actually fell between 25-30% in Perth when the previous mining boom finished and, in many areas, we’re still not back to these previous levels.
So although weekly rents are increasing, the Perth median currently sits at $519 for houses and $397 for units. This is below where they were in 2015 and well short of the 2013 peak when the median Perth house rented for $600 a week and the median unit rented for $475 a week, according to SQM data.
First home buyers: an indicator?
First home buyers usually start as renters. So when they take their first step on the property ladder, they usually leave the rental market.
This makes first home buyer activity an interesting indicator not only of the sales market but also of what may be going on with residential leasing.
The latest Real Estate Institute of Australia’s Housing Affordability Report says that housing affordability for purchasers remained steady in Western Australia. What’s interesting though, is that in WA, the number of first home buyers increased by 105% in the 12 months to March 2021. This represented the largest increase in the country.
In other words, the first home buyers are out in force right now.
Some are spurred on by record low interest rates and the generous government incentives and grants available. But could the rental market have something to do with this phenomenon too?
Regardless of whether it is a cause, or effect, of the tight rental market an increase in first home buyers can result in fewer tenants competing for rental properties. Long term, this could help conditions to ease.
The value property investors bring: a healthy rental market
A low supply of rental properties has been a big issue in Perth over the past few months and it’s certainly one of the main reasons we’ve noticed the market tightening.
This week, REIWA published an interesting commentary about what makes a healthy rental market. It argued that mums and dads (with less than two rentals) are the most common demographic of residential property investors. They may be investing with the aim of financial security, but one of the byproducts is the invaluable service they provide to the community by offering rental accommodation for tenants.
We couldn’t agree more, and believe that property investors play a crucial role in the supply of housing. However, over the past 12 months or more, we have had plenty of owners wanting to sell due to the low yields and low capital growth over the past few years.
The good news is that data shows investors may be starting to return to the market. REIWA points to Australian Bureau of Statistics (ABS) figures which reveal that investor finance in WA surged to a five year high of $462 million in March 2021. This was almost double the figure from March 2020.
Back in 2014, however, the figure was $1 billion so there is plenty of scope for more investors to return too.
Different data straight from REIWA also shows that the number of Perth rental listings is increasing, rising 3.8% in May and 7.4% over the quarter. Meanwhile, in May 2021, the Perth median rental price remained stable for the first time this year, at $420 a week.
It may be too early to say that the pressure on the rental market has eased and this trend will need to continue, in order to achieve a balanced market. However, it’s clear that the news headlines haven’t been giving us the full view of today’s market.
For expert advice from a dedicated property management team, call the experienced Rentwest team today.