Perth’s rental market has been in a state of crisis for years.
The citywide vacancy rate has been below one percent since 2020, and rents have been rising rapidly. Many tenants have been forced to apply for countless properties, pay above the odds, or even pool resources with others, just to find somewhere to live.
But are there signs the rental market may be cooling and the crisis easing? We explore.
Four years in crisis mode
Perth’s rental woes really began in 2020, when the pandemic was at its peak and we saw a lot of people returning to Perth, looking for somewhere to live. However, at the same time, fewer tenants were deciding to move on, and less stock was coming to market.
This meant people looking to rent faced the perfect storm of more competition and fewer properties to choose from. As a result, Perth’s citywide vacancy rate plummeted from 2.5% in April 2020 to 0.9% by November, according to SQM Research. It has been sitting at or below 1.0% ever since. For context, anywhere between 2.5% and 3.5% is considered a neutral market.
These exceptionally low vacancy rates put pressure on rents because they mean demand is well and truly exceeding supply. In fact, the citywide median asking rent has risen by double digits every year since 2020, as the table below shows.
| Date | Vacancy rate | Median Citywide Asking Rent | Increase (12 months) |
|---|---|---|---|
| April 2020 | 2.5% | $412 | – |
| April 2021 | 1.0% | $464 | 12.6% |
| April 2022 | 0.8% | $518 | 12.1% |
| April 2023 | 0.6% | $602 | 16.2% |
| April 2024 | 0.6% | $708 | 17.6% |
* Source: SQM Research, accessed 26 June 2024
Does the latest data offer any relief?
For tenants, there are some positive signs that the worst of the rental crisis may have passed.
For starters, more properties have been coming to market lately.
SQM Research data shows that the citywide number of rental listings in Perth rose by 35.2% between March and May this year. Meanwhile, REIWA data reveals there are 13.2% more listings on the market right now than for the same week in 2023.
There are also signs that the pace of growth in rental prices is slowing. While the median Perth rent may have lifted 17.6% in the 12 months to April 2024, SQM Research data shows it has grown by just 1.1% since.
REIWA’s numbers also suggest rents are steadying with the citywide median rent unmoved for the past month.
Anecdotally, we’re noticing less intensity in the rental market, with more listings and less competition. This means some properties are taking slightly longer to lease.
The counterargument: could this be just a pause?
Of course, these are potential early signs that conditions may be easing, not definite indications the market has turned. There is every chance this could just be a pause in proceedings rather than a definite signal that the rental crisis is over. And, we don’t anticipate a return to pre-pandemic-like market conditions anytime soon.
After all, many of the same ingredients that drove Perth rents to new heights remain in place.
For instance, the population is still increasing. Perth was Australia’s fastest growing city in Financial Year 2023, taking in 81,000 new residents or an average of 220 a day. Our strong local economy and unparalleled lifestyle means we’re still attracting a higher than usual number of more new residents, and the forecast is that the city’s population could rise from just over two million today to 3.4 million by 2050. Each new resident that arrives will need somewhere to live.
While there are more properties available for rent now than there have been, there still aren’t enough. The vacancy rent remains exceptionally low and there are more people looking for somewhere to live than places available.
What this means for landlords and tenants
Even if conditions ease, it is unlikely to impact the entire city uniformly. What usually happens is that certain suburbs or property types become more difficult to lease while others remain tight.
It has been an unusual market over the past few years, with demand equally strong right across the city. If we do return to a normal market, this is likely to change, and landlords’ choices about suburb and property type start to become more vital.
Tenants, on the other hand, will begin to find there are pockets of value where competition is lower, and rents can potentially be negotiated.
However, even a slower market won’t fundamentally change our city’s rental landscape.
For a genuine, citywide solution to the rental crisis, we still need more housing – including social and affordable accommodation – without adding to our existing urban sprawl. The only way to achieve this is through sensible and well-planned infill and CBD development that’s close to public transport and amenities.
Want more?
Are you looking to invest in Perth real estate, rent out your Perth property or find your next Perth rental home? We can help. Get in touch with our specialist Perth rental team today.
