It’s been a remarkable year for the Perth rental market, with record-low vacancy rates, skyrocketing rents and steadily growing yields.
We take a deep dive into the year that was and look ahead to 2022 to find out what’s in store for landlords and tenants alike.
Record low vacancy rates
Perth vacancy rates hit rock bottom this year. REIWA data shows vacancy rates hit a 40-year-low of 0.9% in the September 2020 quarter, and they’ve hovered between 0.8% and 1.2% in the 12 months since. The vacancy rate in the September 2021 quarter was again 0.9%.
To give those figures some context, the national vacancy rate in the September 2021 quarter was 1.7%. REIWA nominates a vacancy rate of between 2.5% and 3.5% as a sign of a balanced market.
Demand for rental properties spiked this year as people moved or returned to Perth in response to COVID lockdowns elsewhere in the nation and around the world. In fact, internal migration to Perth reached an eight-year high this year. WA’s border policy also saw FIFO workers staying put here, adding further pressure to the rental market.
There’s also been a scarcity of rental stock. Although the number of properties listed for rent has risen slightly in recent weeks, overall rental listings remain low. In the week ending 5 December, the rental listings figure was 3% higher than four weeks ago but still 22% lower than the same time last year, according to REIWA.
The huge demand from would-be tenants, coupled with the lack of available properties for rent, has driven rent prices upwards.
Rents rose across the country, with Australian capital city rents increasing by 7.5% over the 12 months to September, but here in Perth, we saw some of the biggest gains. CoreLogic data shows that Perth house rents increased by 14.6% over the twelve months to September, while Perth unit rental prices rose by 13.9% over the same period. These increases were the second largest of any Australian capital city and above the national capital cities average.
While this is good news for investors, it has caused tight conditions for tenants. But given the fact that Perth’s house rents have only increased by 12.4% over the last ten years, which is the least increase of any Australian capital city, it would appear that our rents have just been doing some catching up this year. That growth now appears to have stabilised, with Perth rents only rising by 0.3% in the September quarter.
It’s also worth noting that when compared to the rest of Australia, WA rents come out as the most affordable. Data released by the Real Estate Institute of Australia (REIA) this year shows that the median income to rent ratio in WA is 19%, while the national average proportion of income required to rent is 22.8%.
Rental yields for both houses and units here in Perth have seen healthy growth over the course of 2021. Domain reports that house yields, sitting at 5.03% in the September quarter, are up 4.2% year-on-year. Unit yields, meanwhile, rose 4.6% since the September 2020 quarter to reach 5.67% in September 2021. In both cases, yields are above the combined capital city average of 3.56% for houses and 3.95% for units.
With Perth property offering healthy yields and the significant potential for capital growth over the next year (REIWA is predicting a 10% growth in Perth house prices in 2022), savvy investors are returning to the market. Approximately one-fifth of the value of home loans in the September quarter went to investors, representing their largest share of the home loan market since 2018.
What’s in store in 2022?
In welcome news for tenants, the Perth rental market shortage is expected to ease somewhat in 2022. REIWA predicts that while rental listings will probably remain lower than usual, the growth of investor activity and the completion of new home builds will add some more rental properties to the market.
Having said that, demand from tenants is expected to remain high, especially once the WA borders reopen and more people come to Perth, and REIWA is forecasting median rents to rise between 10 and 15 per cent over the course of next year.
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.