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Perth brokers have been fielding a higher volume of enquiries through the beginning of 2023, as investor interest returns, homebuyers seek to purchase before prices rise out of reach, and lender cashback offers drive borrowers to review their financing arrangements.
Amy Ferguson (pictured above left), of INCA Mortgage Solutions, said there had been a lot of inquiries in January from people assessing their borrowing capacity with an intention to purchase a property in 2023, with demand coming from investors returning to the market, as well as hopeful homebuyers.
“Compared to other years we’ve had a slightly higher level of inquiries from people wanting to enter the Perth market in 2023,” Ferguson said. “On the other hand, with rates changing, a big component of what we are doing is refinancing, and we are expecting a big year for refinancing this year.”
Calculated Lending director Bianca Patterson (pictured above centre) said the Perth market had seen considerable growth over the last few years, with first home buyers, upgraders, downsizers, investors, and developers all active in the same market, often vying with each other for the same properties.
Brokers expect Perth prices to continue to grow due to combination of relatively low median property prices, a very low unemployment rate and vacancy rates under 1 per cent. There is also a critical shortage of planning approvals and new properties being constructed or due for completion.
“We are optimistic about another great year for Perth property prices,” Patterson said. “When you consider the fundamental property principal of supply and demand, all of the factors at play at the moment have created the perfect storm for our market.”
Investors are returning in more numbers to Perth due to attractive market fundamentals. Ferguson said in 2022 there was a lot of interest from interstate investors in particular who were seeking to snap up properties at the lower price points available in Perth, and that will continue this year.
“Locals are also starting to think about investing in Perth again,” Ferguson said. “The sentiment is coming back because of the higher rental yields and demand at the moment.”
Patterson said cash buyers, syndicates and developers had returned, and out of state investors were buying properties at a premium, often sight unseen. She agreed investors were being lured by low vacancy rates, low purchase prices compared to other markets, and attractive rental yields.
“Locally there is also a growing fear that our market will continue to move to a point that it will become unaffordable for the average household to invest in, as it has in other states, which has caused a spike in investment enquiry,” Patterson said.
Local buyer’s agent Peter Gavalas (pictured above right), from Resolve Property Solutions, recently warned the rental squeeze in Perth would get worse, as international students flock back to the city in their thousands, joining an influx of foreign workers drawn by Western Australia’s strong economy.
"The city’s rental stock is at a historical low, with over 18,000 properties removed from the rental pool since January 2021, according to the Real Estate Institute of Western Australia,” Gavalas said.
Perth’s average vacancy rate fell to 0.6% in December 2022, which was the lowest figure Perth has recorded since REIWA started keeping records in 1980. This is well below the level of 2.5% to 3.5% that REIWA considers to be a balanced rental market.
Patterson said this meant the “squeeze is definitely being felt across the state”.
“As interest rates continue to rise, and in turn further reduce home buyers and investors borrowing capacities, we risk the rental shortage in Perth lasting longer term,” he said. “Ultimately it will continue until we can increase the number of properties purchased or built to be made available for rent.”
Rising interest rates and heavily marketed cashback offers from lenders means refinancing is front of mind for existing owner-occupier borrowers. This is leading to strong levels of refinancing for brokers in Perth, who are also repricing many of their customers’ loans.
“Whether they are on a fixed rate or not, with all the changes that have happened with interest rates, people are definitely shopping around,” Ferguson said. “Not all banks are good at passing on new offers to existing clients, and the mortgage is a big chunk of the budget.”
Given that Perth property prices keep increasing while rising interest rates continue to reduce borrowing capacities, Patterson said some clients were panicking and thinking they might miss their window to buy into certain areas, which was driving inquiries.
“We are investing more time educating our clients to ensure they understand that their maximum capacities will continue to change and how this impacts their purchase terms and their broader strategy,” Patterson said. “We are also working closely with their property partners to ensure everyone has an accurate understanding of what they can afford in this environment.”
Brokers do not expect Perth borrowers to struggle with interest rate rises as much as those in expensive east coast cities such as Sydney and Melbourne, due to better housing affordability. Perth has higher average incomes and comparatively lower mortgages, leading to less rate pressure.
“Most borrowers in Perth are in a good position and not leveraged to the extent of borrowers in Sydney, for example, because the nature of Perth is it is quite affordable,” Ferguson said.
Brokers are planning to prioritise customer service to support their businesses in 2023.
Patterson said in some ways it was “business as usual”, as discussions around interest rates, affordability, adequate serviceability and savings buffers, and property trends, remained key aspects of the conversations Calculated Lending had with its clients.
“Ultimately no matter what is happening in a property market, our conversations remain around where our clients are at today, their timing (vs what the market is doing), what they can afford, and what they are willing and able to change to achieve their longer-term goals,” she said.
Ferguson said her business at INCA Mortgage Services would also focus on looking after customers, with sharing information and education playing a big role in supporting client engagement.
“I am very customer centric, and doing what is needed to support customers, whether that is having a chat because they are worried about rates, helping with strategies for household finances, or supporting refinancing to get their repayments as low as possible - whatever my customers need.”
