How Does Perth’s Rental Market Compare To Other Australian Capital Cities?

Data gathered in the September quarter by CoreLogic revealed that Australian rents are the highest they’ve been in 13 years.

Capital city rents have risen 7.5% over the year to September, representing the highest annual growth seen since January 2009. And it’s a similar story in the sales market, with national home values up 21.6% over the year to October.

With both rental prices and housing values rising across the country, how does the market here in Perth stack up?

Rental price growth in Perth and around Australia

Perth’s rising rental prices have made headlines this year, but when you dig into the data, there’s a bit more to the story.

According to CoreLogic, Perth house rents have increased by 14.6% over the twelve months to September. This is a higher rise than that experienced by the combined Australian capital cities, which saw a 9.5% increase in rental prices over the same period, but lower than Darwin, where house rents jumped by 21.2%.

Meanwhile, Perth unit rental prices rose by 13.9% over the last year, and again this was the second-biggest increase nationally after Darwin, which rose by 20.3%. The combined capital cities average was only 3.5%, as Melbourne recorded a -1.6% decline in rental prices.

While this is all good news for property investors, it’s not exactly the bad news story it might seem to be for tenants. Over the past decade, Perth house rental prices have increased by 12.4% – the smallest increase of any Australian capital city. Unit rents lifted by 9.2% over the same period, which is less than the combined cities average of 13.6%. So, the growth we’ve experienced this year could be viewed as Perth’s rental prices simply playing a bit of catch up.

Tenants will no doubt be relieved to know that rental price growth looks to have stabilised. After surging earlier this year, Perth rents only lifted by 0.3% in the September quarter.

Rental prices – how does Perth compare to other Australian capital cities?

In September, the average Perth house rent was $450 per week, according to Domain. Across the combined capital cities, however, the average house rent was $488. Meanwhile, Perth units let for an average of $380 per week in September, compared to $438 in the combined capital cities.

So, although both house and unit rents are at six-year highs here in Perth, which is good news for investors, tenants will be glad to know they remain more affordable than the national capital city average. House rents are still $40 lower, and unit rents are $70 lower than the peak they reached during the 2013 mining boom.

How do Perth’s vacancy rates stack up against the rest of Australia?

There’s no doubt that vacancy rates in Perth are at rock bottom, but that’s also the case in other capitals around Australia. Across the nation in October, vacancy rates slid to a multi-year low of 1.5%, according to Domain.

Perth, Brisbane and Adelaide are currently experiencing their lowest vacancy rates in years, while Hobart, Canberra and Darwin are not far off hitting their lowest vacancy rates. In October, according to Domain, Perth recorded a vacancy rate of 0.5%; only Hobart was lower, at 0.4%. Adelaide is also sitting at 0.5%, while Darwin is fractionally higher at 0.6%.

This means that tenants are very much operating in a landlord’s market here in Perth. Whether that will change soon remains to be seen. Internal migration hit eight-year highs during COVID and caused additional rental demand, but it now looks to be easing. However, REIWA president Damian Collins predicts rental demand will spike once again when our state borders reopen next year.

Meanwhile, there’s been a flurry of investor activity, with around one-fifth of the value of home loans in the September quarter going to investors, their highest share of the mortgage market since 2018. This could bring new rental stock to the market, which would ease demand and be welcome news for tenants.

Capital growth for property in Perth and the Australian capital cities

In welcome news for property investors, house prices have been climbing across the country this year, reaching record highs in some markets. What about here in Perth?

In October, Australian dwelling values rose by 1.5%, a similar result to August and September, according to CoreLogic. Perth, meanwhile, recorded its first negative monthly figure since June 2020, with values -0.1% lower.

The national market, which saw a 2.8% growth in March, is slowly losing momentum due to affordability issues, a rise in properties on the market and a reduction in government stimulus. Over the past year, Perth property values have increased by 16.37%, the same increase recorded in Melbourne. While this isn’t to be sneezed at, it is the smallest gain of all the Australian capital cities. What it represents is a fantastic opportunity for property investors looking to buy in Perth.

Rental yields in Perth and around the country

COVID has knocked rental yields around for investors in Sydney and Melbourne. With no international students or migration at a time when median house prices have been rising, yields have dropped significantly in those two cities. In fact, yields fell in most capital cities across the country in the September quarter, according to Domain, with two exceptions – Darwin and Perth.

The average rental yield for houses in Perth in the September quarter was a healthy 5.03%, compared to 3.56% in the combined capital cities. Meanwhile, rental yields for Perth units during the same period was a robust 5.67%, while in the combined capital cities, it was 3.95%.

Property investors are increasingly looking to cities like Adelaide and Perth, where they can get more bang for their buck, rather than invest in Sydney and Brisbane, where prices continue to rise, and yields are falling.

Whether you’re thinking of investing in Perth real estate, looking to rent out your Perth property or searching for your next Perth rental home, we can help. Get in touch with our friendly and experienced team today.

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