By Suzanne Strong, 2nd May 2012
Perth’s rental market is tightening with vacancies dropping from 2.5% in December to 1.6% in February/March and only slightly rising to 1.9% in April, according to REIWA statistics.
Bernie Kroczek, from Bernie Kroczek Real Estate says the rental shortage has become evident in the past six months but is due to many factors that have been building up over the past few years.
“The rental shortage has occurred due to the large migration into WA, the mining boom, higher levels of immigration than other states, a strong economy attracting interstate people and low levels of first-home buyers and investors,” he says.
”First home buyers have stopped purchasing in WA; they used to make up 29% of the market in 2009 and now they make up 12%.
“The lack of first-home owners has increased pressure on the rental market and there have been virtually no investors.”
Kroczek says WA has been experiencing a downturn in the real estate market in the past few years. “No one has been buying in 2010 and 2011, which means no new rentals on the market,” he says.
He says the WA rental market has finally reached its tipping point.
“Rents have increased by up to $50-$70 a week for some properties and it is not uncommon to see 30 people at an inspection.
“As people are getting desperate they are offering over the rental amount to secure properties.”
Kroczek says these rent prices will not be able to continue to rise and at some point people will resist, however he concedes Perth may not have hit the peak as yet.
A positive sign for the Perth rental market, Kroczek says, is that sales have started to improve in the first quarter of this year.
“People are sick of the gloom and doom economics being reported from Europe and elsewhere and continued low interest rates seem to have led people back into the real estate market.
“First-home buyers are entering the market again as they are seeing the high rental prices and are weighing up the pros and cons of buying. Sales have definitely started to increase over the last few months.
“It is clear the real estate market in Perth has turned a corner. Increased investment confidence and more first-home buyers in the market will help to reduce this rental pressure.”
Gavin Hegney, chairman of the Hegney Property Group, says the rental shortage in Perth hit crisis point in the last six months.
“A large factor amongst other factors for this situation is that mining and construction executives are being relocated to Perth and this alone has taken 50-100 homes out of the top end of the market at a time, in what is already a shallow market.”
Hegney says he has seen a positive increase in sales in the last few months – better than he has experienced for five years.
“At the moment we are seeing about 15% investors and 20% first-home buyers, which is an increase for the past few years.
“First-home buyers and some investors are now slowly entering the market again. Strong wages growth in WA and low unemployment are big reasons people are now opting to buy.”
“Growth in the sales market in Perth, to a level not seen for a number of years, will help to alleviate the current rental shortage. But it won’t happen overnight.”
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