Up, up and away!

On one hand Perth vacancy rates have eased slightly. This is good for the rental market. On the other hand interest rates have gone up twice and this is not so good for the rental market. With Perth’s population increasing and any government intervention unlikely to make an impact for more than two years, the experts are divided on how, and when, our red-hot rental market will begin to find some balance.

Recent figures released by the Real Estate Institute of Western Australia show the number of rental properties on the market increased during the September quarter by 3.4 per cent. This is still tight, but at least a small an improvement on previous quarters. It might just be enough to lift the spirits of thousands of Perth tenants who have long found it difficult – and expensive – to find quality rental options. The light is finally starting to shine at the end of the tunnel. Maybe…

Supply is also at an all time high and still being fuelled by investors looking to feed the strong demand with CBD apartment development at a consistently high level. However with a net positive population growth in Perth and plenty of young people choosing an inner city lifestyle, this supply is in constant demand.

A recent article in The West Australian suggests Perth tenants can expect little relief for at least the next two years. Westpac senior economist Mr Matthew Hassan believes the current market conditions will either stay much the same, or even worsen slightly before they improve.

“It’s very difficult to envisage anything but a continuation over the next couple of years at least,” said Mr Hassan.

Even if the government intervenes by releasing new land areas for development, completion of any construction is years away. In the meantime, the demand continues to grow as disenchanted buyers flood the rental market and other would-be buyers are choosing to invest in equities as opposed to bricks and mortar.

REIWA president Rob Druitt also believes the recent interest rate rises will not help reduce the heat in the current rental market.

“Typically a rate rise will see owners and investors pass on the additional cost to the tenant through rent increases, however this will depend on whether or not the current market will support it.”

November through to March is recognized as a busy time in the rental market as people look to settle in to a property before starting work or university. So it looks like a case of “watch this space…”

A fine equilibrium

After a lengthy renaissance, the Perth property market is beginning to normalise. But with around one per cent unemployment and hundreds of people arriving in Western Australia every day to service the resource boom, the outlook is still strong. The key is to keep properties turning over.

All indicators suggest Australia is driving along a road of strong economic growth. And Perth is sitting in the driver’s seat. As a result, there is always strong demand for good property

“When the property market began its strong upward swing in recent years, Perth was behind the eastern states and was playing catch up,” says Realmark Principal John Percudani. “It was undervalued so it only makes sense that it has also enjoyed a boom”.

“It probably peaked last year and over the course of the past 12 months has reached a state of equilibrium between buyers and sellers. I would say the market has normalised”

Mr Percudani believes that the market is reflecting a slight adjustment in buyer mentality, especially when it comes to “emotional” buying.

“Compared with this time last year, there are nearly 30% more properties on the market. This means buyers have plenty of stock to choose from and are not feeling the same pressure to buy in a hurry,” says Mr Percudani. “The issue of affordability is also key in the sale of property. If buyers do not see value, they are prepared to let is pass.”

This has meant that properties are sitting on the market nearly twice as long as this time last year. Mr Percudani believes sellers can avoid this outcome by reaching realistic price expectations as well as holding real estate agents accountable for the services.

“Sellers need to make sure their agents meet with them weekly and provide campaign reports. If there is no offer within 30 days, then the campaign is in crisis.”

“Sellers should not accept that it will take longer to sell their property, in fact it is imperative it sells as quickly as possible in this high volume market. The property market outlook is strong going forward, but factors such as innovative marketing are going to play an increasing role in the successful turn around of properties.