The rising demand is prompting price growth
A combination of tightening sales stock and rising demand is prompting price growth across a number of Perth suburbs as buyer competition heats up, according to Western Australia-based property investment consultancy Momentum Wealth.
Momentum Wealth Residential Investment Committee Chair Emma Everett said the growth was wide-ranging in established suburbs.
“Although there are some outer areas that continue to struggle with oversupply, we’ve seen a significant tightening of stock for sale across the vast majority of established suburbs in Perth, with low building approvals over recent years combined with few upcoming land releases further limiting the supply of oncoming stock in these areas,” she said.
REIWA data showed there were 10,693 properties listed for sale across Perth in the week ending September 27 – a decline of 22.23 per cent from the same week in 2019.
“At the same time, Perth has recorded a sustained increase in buyer activity in the months following the easing of COVID-19 restrictions, with sales activity trending 40 per cent higher in August compared to the same period in 2019, which is putting further downwards pressure on stock levels,” Ms Everett said.
“These conditions are translating into an increasingly competitive market as buyers in high-demand areas compete for a reducing pool of properties, with our buyer’s agents regularly noting higher attendance at home opens and multiple offers from buyers for high-quality stock in our preferred suburbs.”
While yet to flow through into headline price growth, these conditions combined with suburb-specific demand and supply factors have already translated into improvements across a number of areas, with REIWA reporting that 45 per cent of Perth suburbs experienced increases in median sales price across August.
Ms Everett said this had been particularly the case in suburbs where tightening stock levels and limited oncoming supply had been accompanied by strong demand signals from buyers in the form of high online property views.
She also said houses had been particularly more appealing to buyers than apartments.
“Houses are always resilient in the Perth market, but particularly this year,” Ms Everett said. “With people spending more time at home, perhaps there is a trend towards valuing that space even more.”
While the average days on market for properties in the Greater Perth region was 50 days in the three months to June 2020, this was significantly lower in areas such as Kingsley, Beldon and Mount Hawthorn, where high online property views and limited stock led to days on market of 20, 20, and 24 respectively across the same period.
These suburbs were amongst a number of areas to outperform the broader market in the year to June 2020, recording price growth of 6.3 per cent, four per cent and 6.3 per cent respectively, where prices in Greater Perth declined 3.1 per cent across the same period.
Ms Everett said while primarily owner-occupier driven, and despite the extension of the emergency period in WA, savvy investors were already turning their attention to Perth as conditions ripened.
“As it stands, these improvements are primarily being driven by owner-occupiers and first homebuyers, however, we are starting to see interest from investors who recognise conditions are ripening and the market is already moving, and we expect it’s only a matter of time until others follow suit, particularly once we see broader rental growth” she said.
Momentum Wealth Property Management Team Leader Amanda Kroczek said while the extension of the emergency period meant rent increases remained prohibited for existing tenancies, rents were already rising for new tenancies.
“With rental vacancy rates reaching a 12-year low in Perth and rental stock continuing to tighten, our property managers have seen a significant rise in tenant competition on the ground, which in many cases is resulting in rent increases for advertised properties, as tenants are offering more to secure their property of choice,” she said.
Ms Everett said when combined with the relative affordability of Perth, these conditions presented excellent opportunities for investors in a position to enter the market.
“Perth’s relative affordability, improving rental conditions and early growth indicators are providing ideal conditions for investors with the right property selection criteria to enter the market at a reasonable price point and at a strong yield while positioning themselves to leverage future market improvements,” she said.
REIWA President Damian Collins said the extension of the emergency period meant investors were shying away.
“In a time when we need more investors entering the market to help build up rental stock supply, we are putting up barriers to not only prevent new investors, but also not helping those currently providing a basic human need – housing for all Western Australians,” he said.
Ms Everett said it could take a while for casual investors to catch wind of the change in conditions.
“Sometimes this news takes time to travel,” she said. “So while we are seeing the tighter rental market and properties selling more quickly, unless you are active in the market, it can take a while to show up in the statistics.
“Often by the time it shows up, that activity has been heating up for six to 12 months. It can take investors, particularly if they are not based in Perth, time to understand those market conditions.”