18 Feb Perth rents on the rise – Emma Everett
Rental competition in Perth is on the rise, according to property investment consultancy Momentum Wealth. Now that is good news. We discuss that with Emma Everett.
Kevin: We’re always looking for good news, and it’s great when it comes out of Western Australia, Perth. You’d be aware, I’m sure, of the fact that we’ve tipped that the Perth market is actually showing some good signs of recovery. Green shoots appearing. Here’s some great news about the rental market; rental competition in Perth is on the rise according to property investment consultancy, Momentum Wealth.
Kevin: Joining us from Momentum Wealth to talk about this, Emma Everett. Emma, thank you very much for your time.
Emma: Thanks for having me, Kevin.
Kevin: Yeah, great to see some good news happening here. What it is you’re noticing? Is it increased numbers through open homes?
Emma: It’s interesting. We’ve seen some improvements in the vacancy rate and the number of rental listings on the market over the last six months. What we’re noticing now that’s different to perhaps when we spoke to you last year was seeing that translate into extra competition. More people at rental home opens, more applications. That’s starting to filter into higher rental prices for owners as well.
Kevin: I imagine with the competition you’d probably notice a few more frantic tenants as well. Is that translating to offers over the asking price?
Emma: Look, we have seen higher levels of motivation from tenants. There’s still a decent amount of rental listings available. It’s certainly not a heated market in that sense. But we have started to see some offers above the asking price. The Residential Tenancies Act in Western Australia is pretty strict about how we approach this. You can’t ask for bids like you might do in the sales market, of course. To be seeing one or two properties who’ve had $20.00 over the asking price offered by tenants just keen to get their application to the top of the pile.
Kevin: Mm-hmm (affirmative). You can’t stop them if they want to offer you the incentive but you can’t encourage them to do it, pretty much.
Emma: It’s a tricky thing. For property owners who have been in a market as a buyer where they are negotiating, to then be owners in a rental market where there are those restrictions can be a bit tricky for them. But certainly if a tenant attends a home open, there’s 17, 18 other groups of people through that home open, and they can see others taking applications, it’s only natural that some of them would offer that little bit extra just to make I guess their interest in the property really clear. So we certainly don’t stop them from doing that.
Kevin: Emma, you mentioned at the top of our interview that vacancy rates are improving as well. Where are they now and what were they at their worst?
Emma: The absolute worst they were over 7% back in 2017. As of yesterday at 2.8% in the three months leading up to end of December. So it’s interesting compared to even six months ago, that’s still a very significant drop. In September we had a 4.5%, in November it was at 3.9% and now we’re down at 2.8%. So this is a trend that has continued over the last 12 months. We’ve just gradually seen more and more tightening of that rental market, which is great news for investors.
Kevin: At what point do you call it equilibrium? Where is it … You know, more comfortable?
Emma: Generally around the 3% mark would be considered to be a balanced rental market from a vacancy rate point of view. So I would say we’re probably there now. Of course it depends on the location of the property. Some suburbs have more supply than others, and some types of properties might rent more quickly than others as well.
Emma: As a market overall, I would certainly say we’re a fairly balanced market from a renting point of view.
Kevin: Great news for investors, too. Are you finding them moving back into the market?
Emma: We’ve certainly seen a little bit of extra confidence. We haven’t seen statistically a lot of extra investment activity in the market quite yet. Of course, APRA reviews and the Royal Commission have made it more tricky for some investors to get lending. So those investors that we are seeing are finding they just need to do a bit more homework and a bit more preparation of their finances before they can reenter the market. So that might slow down that investor increase over the next few months until we find that new normal in that finance space.
Emma: We are seeing more inquiries, and we are seeing a little bit more inquiries in the first home owner price ranges. That will be the other thing I suppose, is that as rent gets more competitive, as it gets more expensive, that tends to tip first home owners out of the rental market back into the purchasing market again. Which then allows other people to trade up or buy other properties and then do other transactions as well.
Kevin: What areas around Perth are you seeing as the most popular? Even take us into some of the coastal areas, any more popular than others, Emma?
Emma: Yeah, it’s interesting. I was just looking at this earlier this week. The coast and the city are the two big draw cards and of course, to an extent, the river as well in Perth. What we’re noticing is that days on market in the sales market are telling a story that has not yet translated into the actual retail prices in those areas. So you look at a corridor like for example Craigie, Kingsley, Padbury which is one suburb in from the beach north of the river in Perth. Those properties are selling on average two weeks more quickly than the suburbs immediately surrounding them, so the more expensive coastal suburbs that are right on the coast. But they’re selling about a month faster than suburbs that are, say, two suburbs further inland.
Emma: So that makes a really big difference if you’re entering that market, needing to make a quicker decision and potentially competing with other buyers. Likewise we’re seeing some pretty interesting buying competition in the trade up home buyer market, in $800,000.00, $1 million plus, in some locations close to the river, close to the city. We’ll be seeing again quicker sales and isolated more resilient prices. So again it might not translate into median house price increases at this stage, but we are seeing more activity which is a great sign in those areas.
Kevin: Yeah, it’s a fantastic sign. Another indicator too would be employment opportunities. Are they … Seem to be opening up? Is that expanding?
Emma: Absolutely. So there’s a lot of anecdotal evidence and a lot of I guess information out there in the market now about employment opportunities in resources, in gas, in lithium. Recruiters are telling us that where perhaps a year ago, two years ago, they weren’t interested in any interstate or overseas candidates just because they had more than enough candidates to shop from here in WA, they’re not starting to actively seek out those candidates to fill the vacancies that we have.
Emma: The other interesting thing about the phase we’re in in the mining story that’s a long-term part of the WA economic story, is that we’re in … A lot of the projects are in more of an operation phase and less construction. So where perhaps previously a lot of jobs were about building new sites and we knew that those jobs would be relatively short-term, these projects are in operation so that demand is ongoing and so that employment is ongoing as well. Which is great news for those people.
Kevin: Yeah, fantastic news. Any good news out of Perth is always very welcome. Emma, thank you for sharing it with us. Emma Everett is from Momentum Wealth in Perth. Thanks for your time, Emma.
Emma: Thanks for having me.