Time and time again, Perth has proven its resilience as a property market despite economic turbulence. Will the Western Australian capital city market come out stronger from the COVID-19 outbreak?
Nu Wealth’s managing director Daniel McQuillan said that the next 12 months is set to spark positivity for the Western Australian property market, with the sustained upswing in the resources sector driving the resurgence in the state’s economy.
“The resources sector in Western Australia has just reported record sales of $172 billion during the 2019-20 financial year,” according to Mr McQuillan.
“Iron ore sales reached a record $103 billion on increased output and an eight-year price high, while gold sales also soared to an all-time high of almost $16 billion. Mineral exploration expenditure rose to $1.7 billion, an increase of 17 per cent from $1.4 billion in 2018-19, while oil sales increased to $2.6 billion on higher volumes, while nickel sales recovered to more than $3.1 billion, a four-year high.
“These figures are fantastic news for the WA economy, and there is now a growing upswing in job creation in the state at a time when other areas of Australian economy are suffering because of the impact of the coronavirus.”
For instance, BHP recently announced that it will create up to 1,250 new apprenticeships in Perth as part of an $800 million skills and technology package to be rolled out over the next five years.
Further, other resources companies like BHP are now requiring interstate workers to permanently relocate to Western Australia.
“It is no surprise that as a result of this major new resources investment in Western Australia, the unemployment rate in the state has quickly fallen to pre-coronavirus levels,” Mr McQuillan said.
“The resilience of the WA economy is now having a positive impact on the local property market with an upswing in property sales and the rental market. The rental vacancy rate in Perth is now just 1.3 per cent – a level now seen since the lasting mining boom.”
Nu Wealth’s strategic adviser Craig Gemmill added that the drop in Perth’s rental vacancy rate also stands as a forward indicator of the property market.
The low levels of vacancy rates indicate a shortage of accommodation, which could ultimately lead to a significant rise in rents over the next 12 months as a result of greater investor activity that will feed into higher property sales and higher property prices.
“There are now excellent buying opportunities for astute investors in the Perth market. Smart investors can now purchase near-new apartments in Perth with existing tenants at very affordable prices from developers who have rented their stock out because of poor past sales and are now keen to sell. These apartments will deliver income from the day it settles without having additional cost of letting and fit-out fees,” Mr Gemmill said.
For these reasons, the experts remain “very confident” that, over the next 12 months, Perth and the rest of the Western Australian property market will be seeing its best year in nearly a decade.
According to the latest Hedonic Home Value Index data by Corelogic, Perth saw a 0.2 per cent increase in dwelling values over the past month, bringing the median value to $445,717.
Over the quarter, Perth’s dwelling values decreased by 0.3 per cent, and by 1.0 per cent over the year. Overall, the total return in the Western Australian capital sits at 3.3 per cent, significantly lower than the national average of 8.5 per cent.
Despite the decline year-on-year, Momentum Wealth’s chair of residential investment committee Emma Everett believes that Perth’s monthly data indicates improved conditions for the property market.
“While yet to flow through into resumed headline price growth, these conditions, combined with suburb-specific demand and supply factors, have already translated into improvements across a number of market segments in Perth, with REIWA reporting that 45 per cent of suburbs in the western capital experienced increases in median sales price across the month,” she said.
Ms Everett noted that this was “particularly evident in suburbs where tightening stock levels and limited oncoming supply had been accompanied by strong demand signals from buyers”.
REIWA data shows Kingsley, Beldon and Mouth were among a number of suburbs to outperform the broader market for both days on market and median sales price, with the suburbs recording price increases of 6.3 per cent, 4.0 per cent and 6.3 per cent, respectively, for houses in the year to June 2020.
Domain’s latest First-Home Buyer Report has revealed that aspiring home owners in Perth require only three years and five months to save for a 20 per cent deposit, which is one less month of financial preparations to purchase a house worth an average of $366,580.
Ultimately, “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,” according to Ms Everett.
Data from SQM Research found that, from March 31 to September 30 2020, house rents in Perth increased by 3.3 per cent, while unit rents increased by 1.5 per cent.
The median rental yield currently remains stable at $360 per week, but suburbs in greater Perth are showing even greater positive growth signs in September, with Quinns Rock, North Perth, Dianella and the top performers.
In terms of listings, the Western Australian capital dropped to an eight-year low as consumers swoop in on empty stock, according to REIWA data, which showed listings in September fell to 2,926, falling by 8 per cent over the month.
According to REIWA president Damian Collins: “With Perth’s vacancy rate sitting at 1.3 per cent, it is no surprise that we are seeing listings for rent continue to lower. In addition, a number of our regional members are reporting vacancy rates close to zero, so the impact is being felt across the entire state.”
Meanwhile, leasing days were also notably faster in September, taking a median of 19 days to lease a property in greater Perth, with the research stating it was the quickest time since June 2013.
“With population growth returning closer to long-term average levels in Western Australia, the state government needs to encourage investment in property to accommodate returning expats and existing tenants,” Mr Collins said.
“There is the possibility we will run out of properties next year unless something is done to entice investors back and encourage first-home buying in established areas.”
Perth’s vacancy rate dropped again by 0.3 per cent over the month. In just two months, Perth’s vacancy rate has gone from 2 per cent to 1.3 per cent and is expected to continue lowering over the coming months.
This, combined with the extension to the emergency tenancy laws by the Western Australian government, is furthering the struggle for tenants who are yet to find a property.
New research by REIWA found that buyer activity in Perth is tracking 40 per cent higher annually, with 45 per cent of Perth suburbs recording price growth in August 2020 as local buyer’s agents note high attendance at home opens.
According to Ms Everett, affordability and improving rental yields are presenting a drawcard for investors.
Data from the REIWA showed there were only 10,686 properties listed for sale across Perth in the week ended 20 September – a decline of 23 per cent from the same period 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,” she highlighted.
“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.”
In terms of buyer preference, the Domain Buyer Demand Indicator revealed that houses and apartments were the most demanded properties in the outer suburbs of Sydney, Melbourne, Brisbane and Perth over September.
As consumers start to adapt to the new norm, living near the office has become a less crucial factor in property decision-making across capital regions.
Domain senior research analyst Dr Nicola Powell said: “The current health crisis has changed the way we use our homes, and for some altered our purchasing decisions and property wish lists. While COVID-19 lockdowns sent buyer demand into a state of hiatus, activity from people likely to buy has rebounded in all capital cities apart from Melbourne.”
One Mabel Park comprises 46 boutique apartments over six levels designed to capitalise on attractive vistas over Henderson Park Reserve Jolimont Lake and the Perth City skyline. The development is positioned within close proximity to a full suite of retail amenities, public transport, sporting facilities and recreational park reserves.
According to MaxCap Group, the project is located in the “highly desirable, established residential suburb” of Jolimont, centrally positioned between Perth City and its beautiful beaches.
Presently, the Perth residential property market is appearing more resilient to the impact of COVID-19 compared to most east coast capital cities.
MaxCap Western Australia’s investment director Ben Jones said: “MaxCap is very pleased to be providing the construction funding for Iris Residential on their exciting One Mabel Park development. Tailored towards the owner-occupier market and commanding attractive lake and parkside views, we expect this project will continue to command strong levels of purchase demand given its desirable attributes.”
While Perth’s median house price has shown little movement over the last 18 months, purchase demand within Perth’s western suburbs has seen a significant uplift in 2020.
Adding to the encouraging signs in the residential property market that position Perth for growth include a compressing residential vacancy rate, several state government stimulus packages specifically targeted towards housing and construction, an improving state net migration due to travel and a performing resources market, which ultimately aids jobs growth and wealth creation.