Perth’s affordability and high rental yield offer a window of opportunity for property buyers, but it could be limited as stock in established areas continues to tighten.
Westpac chief economist Bill Evans, Hotspotting’s Terry Ryder and various other industry experts are predicting strong long-term growth for themarket moving forward, despite economic uncertainties and the ongoing recovery of the nation from the effects of the COVID-19 outbreak.
Mr Evans, in particular, predicts a national surge in property prices from June 2021, with Perth leading the charge alongside Brisbane with projected growth of 18 per cent by 2023.
According to Momentum Wealth’s chair of residential investment committee, Emma Everett, improving conditions in Perth’s residential sector had already seen the market resume headline price growth.
“Given the significant tightening of stock we have seen across both the sales and rental market, combined with the sustained increase in buyer activity following the lifting of COVID-19 restrictions, it was welcome but unsurprising news to see these improvements reflected in CoreLogic’s Home Index for September,” she said.
Data from CoreLogic showed property prices in Perth rose 0.2 of a percentage point last month, resuming a trend seen in early 2020 when the capital city recorded six consecutive months of positive price movements.
Further, demand has shifted in the Western Australian capital as property consultants witness heightened competition across a number of suburbs.
“While these conditions are now translating into resumed headline price figures, competition in many of our approved suburbs has been heating up for some time as buyers compete for a reducing pool of properties, with high-quality stock moving very quickly as a result,” Ms Everett said.
“Our buyer’s agents are seeing investment-grade stock go under offer in as little as one to two weeks in these high-demand areas, often with multiple competing offers.”
This comes as data from the Real Estate Institute of Western Australia revealed houses sold 27 days faster in September 2020 compared with the same month the year prior, taking a median of 28 days to sell compared with 55.
According to Ms Everett, market improvements have been particularly noticeable in established suburbs located in close proximity to key amenity drivers such as the CBD and school zones. In many cases, these areas also have limited new stock coming on stream.
Data from realestate.com.au showed that Heathridge, Wembley and Leeming were among the suburbs with the lowest proportion of property stock for sale in October, with only 0.8 of a percentage point, 0.9 of a percentage point and 0.5 of a percentage point of stock available, respectively.
These improvements have also been reflected in a lowering of days on market over recent months, with the said suburbs all recording average days on market significantly lower than the Perth average (49 days) across the June quarter at 14, 10 and 33 days, respectively. These conditions have continued onto October, Ms Everett said.
“A lot of the activity in these established areas has been driven by owner-occupiers and first home buyers, many of whom are recognising the market’s relative affordability and the opportunities this is bringing in terms of trading up their existing home or entering the market at a lower price point,” she said.
The June Housing Affordability Report from the Real Estate Institute of Australia (REIA) showed Perth was the cheapest state across Australia to purchase property, with only 24.0 per cent of family income required to meet loan repayments compared with 42.3 per cent and 36.8 per cent in NSW and Victoria.
Western Australia’s affordability, along with tightening rental stock and continued growth indicators, offers a unique opportunity for investors who are in a position to enter the market, according to Ms Everett.
“There’s a unique opportunity for investors with the right property criteria to enter the market at a reasonable price point while also benefiting from a strong rental yield before the market records further price growth,” she said.
While many investors are awaiting the end of temporary COVID-19 legislation, this could also come at the cost of higher competition.
Thus, she encouraged savvy investors to grab opportunities in the Perth market, as well as other areas in Western Australia, in order to make the most out of its wealth-creation potential over the long term.
“With quality stock already hard to come by in many of our investment-grade suburbs, and days on market reducing as a result, buyers who wait for further indicators of market improvement risk entering the market when there is less stock to choose from and increased competition for high-quality properties, which could mean paying more to secure a property in their desired area,” she concluded.