In pretty much every aspect of our lives, the COVID-19 pandemic has defined 2020.
It has closed state and federal borders, forced many of us to work from home, re-written the way we shop and socialise and, of course, impacted our local property market.
That said, we’ve been extremely fortunate here in Perth that our COVID-19 caseload has remained low and our life has been able to carry on under the “new normal”.
So where is the Perth sales and rental market at right now and how has residential property in our city fared during 2020?
Property trends in 2020
First things first. Property prices in Perth rose by 0.8% over the year to 30 November 2020, according to CoreLogic data. While that may not seem remarkable, it comes on the heels of a -6.8% price fall over 2019 and a -4.7% price fall in 2018.
When combined with our relatively strong yields (more on that below), Perth property actually gave investors a healthy 5.2% return over those same 12 months.
While nothing – including this positive data – should surprise us in such an unprecedented and unpredictable year, we have noticed some key trends emerge across the Perth real estate market.
- There has been a marked decline in short-term rentals. This is understandable given there are fewer international and interstate tourists to keep the demand going for Airbnb style short term holiday lets. Instead, we’ve experienced a huge demand from landlords wanting to turn these properties into long term rentals, as we wrote about in this case study earlier this year.
- There has been a shortage of long-term rentals. We’ve experienced a shortage of rental listings, as expats and travellers returned home seeking long-term accommodation to wait out the pandemic. Vacancy rates have dropped dramatically across the city.
- Rents have stayed strong. There’s no doubt that the pandemic had the potential to impact the rental market, especially as young people in more vulnerable sectors are over-represented in the ranks of tenants. However, thanks to Perth faring better than many other cities, Commonwealth wage subsidies and the WA government’s COVID-19 emergency measures for tenants and landlords, we simply haven’t seen the widespread impact on rentals that many anticipated. In fact, REIWA data shows that just 1% of the 160,000 private tenancies in WA had been unable to meet their full rental obligation and rental arrears are at record lows.
- Sales listings are down too. What we have seen is lower sales stock, or listing levels in 2020 compared to the last few years. Sellers seem to have taken a ‘wait and see’ approach in the midst of this uncertain economic climate. This isn’t surprising given low consumer confidence has been recorded across the country.
- Low-interest rates are having an impact. For those looking to get into the property market, 2020 has been a good year. We’ve also seen record low interest rates, with two big cuts this year, leaving the cash rate at 0.1%, and making it cheaper than ever to borrow money for a home loan. We’ve also seen Commonwealth government initiatives to bring buyers into the market, such as HomeBuilder and the first Home Loan Deposit Scheme.
- Technology has reached a tipping point in our sector. We’ve also seen a rise in the use of technology across all industries during 2020 – and real estate is no exception. From virtual tours to video inspections, we expect this trend is here to stay and at Rentwest Solutions we’ve done all we can to embrace it.
These trends are having a real impact on the property market, as you’ll see below.
Increased sales activity
Property sales activity in Perth during October 2020 was up 2.7% on the same time last year. The suburbs that experienced the largest increase in activity were Yanchep, East Victoria Park, Cloverdale, Hammond Park and Aveley.
Interestingly, land sales have dominated sales activity, thanks in no small part to the Federal government’s $25,000 HomeBuilder stimulus grant, alongside other grants and schemes that favour new builds. Sales activity for units was strongest in Fremantle, Rivervale, Innaloo, Tuart Hill and Rockingham, thanks to new concessions for off the plan apartments.
From June to September 2020 the Perth median house price was stable, at $475,000, with properties selling in an average of 30 days, down from an average of 56 days a year ago.
REIWA data shows that 58% of Perth’s suburbs experienced stable or rising median house prices over the third quarter of 2020, with Brabham, Kelmscott, Claremont, Roleystone, and Swan View recording the largest increases.
The rental market strengthens
As of October, the vacancy rate had fallen to 0.9%, the lowest it has been since February 2013. According to SQM Research, Perth median rents have risen steadily to reach $364 a week for units and $484 per week for houses as of November 2020 – the highest they’ve been since 2015. Meanwhile, REIWA has the median rent sitting slightly lower at $390 for houses and $350 for units.
So, rents are generally up and vacancy rates are low, thanks to a lack of available rental stock. More investors will need to enter the market for stock levels to increase. Perth remains the cheapest capital city to rent in, and is also one of the most affordable to buy in, with comparatively good rental yields right now, making it a great option for investors.
One great example of what’s happening in the current market is 46 Sugargum Rise, Kiara, a brand new four-bedroom family home. We appraised it at $450-$470 but it ended up leasing – at the first open home – for $490 a week.
Another brand new property, 2/2a Hertford Street, East Victoria Park, we appraised at $650. It ended up leasing within three days for $690 after three great applications.
Both these homes were brand new, in sought after locations, and had good proximity to schools, shops and cafés. There is also low stock of properties at this price point and in these areas.
Good news for Western Australia’s regions
Thanks to economic and population changes, REIWA has reported that eight of WA’s nine regional areas have shown an increase in their median sales price over the September quarter, accompanied by an increase in listings for sale and sales volumes.
This is great news after several fairly flat years across WA. It’s also positive for regional rentals, with all nine regions experiencing a decrease in listings over the same quarter, resulting in low vacancy rates.
The future of Perth’s residential property market
Many hope that the WA economy will continue to be less affected by COVID-19 compared to the service-industry-reliant economies of the Eastern States.
With evidence of rising rents and median sales prices, despite the pandemic, there’s every reason to be optimistic about the Perth property market in 2021.
If you’re looking to invest in Perth’s property market contact our specialised team of property managers today.