Market Update: Perth’s Rental Oversupply Means Lower Prices for Tenants

In what comes as good news for tenants, Perth is experiencing a consistent trend of rental value drops across the city.

In a number of property market reports released in the last six months, there is one consistent finding – the oversupply of available rentals is putting pressure on prices to decrease. In stats published by the Real Estate Institute of Western Australia (REIWA), it was shown the number of properties available for rent in Perth is almost three times above the long-term average.

According to Domain, prices have hit their lowest point in five years. The rental prices of houses have decreased by 10.7% to an average of $390 per week, and apartment prices have slumped down 9.3% to $335 per week in the past 12 months. You could compare this to renters paying an average of $490 per week at the height of the mining boom in 2013.

What brought thousands of people to Perth in our then-thriving economy, demanding a housing supply to satisfy the high influx, has finally bottomed out. Rental vacancy rates in Perth are now the highest out of all capital cities in Australia.

Michael Yardney, the director of Metropole Property Strategists, featured in Your Investment Property’s August 2016 Market Report to provide some insight on the rapid demand decline.

He attributes the fall to Perth’s “declining population, soaring unemployment rates, decreasing number of transactions and the increasing lack of confidence in the property market.”

The property market in Perth is knee-deep in trying to grapple with the aftermath of the collapse of the mining boom and the subsequent migration of people back to other parts of the country where jobs are more readily available.

REIWA president, Hayden Groves, told the ABC that the number of properties available to rent on the market is at a level never seen before – something that will most likely continue for the remainder of 2016.

While it is no secret the current trend is favouring rental tenants; there is still hope for investors. Along with the rental price drop, property values in Perth have fallen by 4.2% since December 2014. Currently, there are no signs that the market will make a drastic turn, which suggests there are still bargains to be found in the Perth area at the present moment.

While property is relatively cheap around the metro area, Paul Glossop, founder and director of Pure Property Investment, suggests investors need to strike at the right time. He told Your Investment Property, investors should buy at the beginning of the next growth cycle, and not the bottom, to ensure they are achieving capital growth.

For investors who can negotiate well, and are prepared to brace a few years of slow or negative growth, Perth could be an ideal market to invest in.

At Select, we provide no-obligation, quality and free advice to help you reach your financial goals. Follow us on Facebook to keep up to date with current finance news and tips.