Perth’s housing market is set to boom in 2021, with economists forecasting growth of up to 12%.
This could be good news for the city’s tight rental market, freeing up more stock and easing pressure on rising rent prices.
We dig a little deeper into the dynamics of a booming market to find out what it means for landlords and renters.
Boom conditions return
Perth’s property market will experience conditions not seen since the mining boom, according to a range of professional forecasts.
ANZ economists expect Perth property to outperform all Australian capital cities in 2021.
They forecast Perth housing prices will jump by 12%, adding $47,500 to the median house price and $37,000 to the median unit price.
It is the only capital city set to record double-digit growth, with the next strongest performer, Brisbane, expected to deliver 9.5% price growth.
The Real Estate Institute of Western Australia (REIWA) has more modest – but still healthy – growth projections for Perth of 6-10%.
Factors driving the anticipated price rise across the nation include historically low-interest rates, high levels of government stimulus, the reopening of domestic borders and improved economic activity as community transmission of COVID-19 is, hopefully, brought under control.
Specific factors driving Perth’s rise include the strong performance of the mining sector and a shortage of housing stock.
Rents will rise in 2021
In the short term, a rise in property prices is expected to place further pressure on Perth’s rental market.
REIWA warned in October that Perth was in a ‘rental crisis’, as vacancies reached their lowest level in 13 years, falling below 1% for only the third time in 40 years.
Reduced investor activity has exacerbated the shortage of rental properties. While investors usually account for 30% of home purchases, that has fallen to 17% in recent months.
REIWA President Damian Collins said Perth rents could rise a further 10-15% in 2021, particularly as travel restrictions ease.
“However, even with this increase, WA is still the most affordable of all the Australian states and territories,” he said.
Enticing back the investors
Rising property prices could actually be good news for the rental market in the medium term.
Favourable conditions are likely to entice investors back to the market, boosting supply and containing rent increases.
Mr Collins said for investors to confidently re-enter the market, it was vital for the WA Government to end its moratorium on rent increases and tenancy evictions in March 2021 as promised.
The current market conditions highlight the need for investors to utilise the services and expertise an experienced property manager can provide.
As a specialist property manager focused on Perth, Rentwest Solutions’s team has expert knowledge of the city’s rental property market.
Our team would be happy to advise you on issues that may affect your investment property portfolio.