Perth house rents recorded the strongest growth in the nation during the December quarter signalling a market turnaround, a new report shows.
The city’s house rents also increased annually for the first time in half a decade, adding 2.9 per cent over the year and the same amount over the quarter to $360 per week, according to the latest Domain Rental Report.
Rental yields for houses in the resources-affected market also showed green shoots, increasing 1.2 per cent during the quarter and 5.5 per cent over the year to 4.34 per cent.
And the apartment market performed better than in the past, with unit rents steady over the quarter and year at $300 per week, while yields improved 2.7 per cent over the quarter and 9 per cent over the year to 4.75 per cent.
“While unit rents have remained flat for seven consecutive quarters, this is a marked improvement following four years of weakening prices up until 2017,” Domain senior research analyst Nicola Powell said.
“All signs point to a turnaround in Perth’s rental market. Demand for rental accommodation will be supported by an improving jobs market and local economy, giving residents greater incentive to stay and new residents reason to relocate west.”
In 2018, Perth began to experience a broad tightening of the rental market driven by fewer rental listings, slowing construction of new apartments and stable population growth, Dr Powell said.
“If this continues, competition between tenants may start to emerge, which has most likely already begun for house rentals,” she said.
“Investors will find Perth a more attractive option as they seek better yields and growth prospects, particularly given falling property prices in the east coast.”
Andrew Friebe, LJ Hooker WA managing director, said tenants should expect increased competition for rental properties as the resources sector continued to ramp up, which has been reflected in moderate increases in asking rents during the past year.
“The latest Bureau of Statistics data shows there were 1,352,100 people with jobs in WA in the November quarter – a net increase of around 20,000 jobs on the same period in 2017,” he said.
“WA’s mining sector is driving employment growth with the sector employing 111,800 workers in the November quarter, up from 87,800 in the comparative period in 2017.
“On a city-wide basis, tenants will have less bargaining power in 2019.”
Strong tenant activity was encouraging for the year ahead with landlords and tenants optimistic about the economy, Realmark Coastal managing director Sean Hughes said.
“The new year has seen the rental market shift into top gear with very strong tenant inquiry,” he said.
He said there was evidence of families relocating from the US and the UK, as well as West Australians returning from the east coast.
“We have also seen a high number of applications coming into the office from people who have recently sold their homes and want to rent while they take their time to find their next home,” he said.
Low stock levels were likely to continue as investors hesitate in the wake of the financial services royal commission, Mr Hughes said.
“Tenants are playing a very competitive game eager to lodge applications prior to viewing the property. This situation is further fuelled by low rental stock,” he said.
Acton Real Estate chief executive Travis Coleman said a steady marginal growth trend was likely to continue in 2019 with a renewed positivity about jobs growth in WA driving the property market towards lower vacancy rates and pushing demand even further.
Mr Coleman advised landlords that tenants were still spoilt for choice, so it was important to ensure a property was presented to the market properly.
“Take the advice of your property manager in regards to maintenance and the condition of the property to ensure it attracts as many quality applications as possible,” he said.
Daisy Campbell, Xceed Real Estate licensee, said many tenants, particularly families, were now able to upgrade their family home and receive better value for money.
“This can create the illusion of improvement in the rental market because the leasing statistics are going up but for every family who has shifted into a newer cheaper home, their old home has just become vacant and joined the rental market again,” she said.
Meanwhile, Dr Powell believed Perth was now more than likely to lure interstate and overseas investors.
“Investors have traditionally been attracted to Sydney and they have been attracted to the strong capital gain,” she said.
“But I think the fact we have got Sydney and Melbourne now deteriorating in the short to medium term in terms of that capital gain, I think investors have already started to look at other areas to invest in the property market and I think Perth is certainly an area that may come on an investor’s culling list.”