Perth's ‘crazy’ rental market drives record demand

Whether you are buying or renting, Perth’s property market is going gangbusters – experiencing record demand, extremely low vacancy rates, and growth nearing double digits.

With record net migration fuelling the population, typically lower socio-economic areas are experiencing unprecedented rental demand, which has pushed people to buy who may have otherwise rented.

Yet this is just the beginning of a sustained increase in the property market of one of the most isolated cities in the world, according to WA-based mortgage broker Robert Flynn (pictured above left).

“Homeowners are a bit more optimistic now. People are getting great rental yields and their equity is increasing,” said Flynn, director of Vorteil Financial Group and winner of the Young Professional Award at the recent MFAA WA Excellence Awards.  

“As more people enter the market and with slow building approvals likely to persist, demand among both investors and owner-occupiers will likely continue for some time.”

Rental pain persists

The Australian rental market is challenged by strong demand and tight conditions, with the vacancy rate sitting at a record low.

However, nowhere in Australia is this more apparent than in the Greater Perth area, which has nine of the top 10 most in demand suburbs to rent in Australia – some receiving as many as 160 enquiries per listing on realestate.com.au, according to new PropTrack data.

Flynn said it was the same story everywhere. Rent increases are pushing people back into the market; People are lining up for hours and there are dozens of applications for a single property; and if you’ve got pets, children, or have a single income – prepare to pay overs.

“Many people I talk to say they were planning on buying in two to three years but had to buy because they’ve been looking for a rental for months and their lease is up in six weeks,” Flynn said.

“It seems like a crazy reason to buy a house but unfortunately that is the reality – the market is that competitive.”

Top 10 suburbs nationally by key enquiries per listing

^{Source: PropTrack}

Strong population growth is also adding to housing demand, predominantly in the rental market given recent arrivals are most likely to rent, according to PropTrack. In the 12 months to March 2023, Western Australia’s population grew by 2.8% – the fastest growth of all the states and territories.

The Western Australia government is actively promoting the state as a destination for skilled work regional migrants (491 visas) and has successfully lobbied to have the entire state declared a designated regional area.

This means that skilled migrants on regional 491 visas can arrive, live, and work in Perth, making it the only capital city which has achieved this distinction.

For this reason, Flynn said he wasn’t surprised to see suburbs like Bentley, Queens Park, and East Cannington on the list of most in demand rental suburbs given their proximity to Curtin University – a major hub for international students.

“A lot of these areas face added demand as international students and migrants look to establish themselves on top of the current pressures,” Flynn said. “The other interesting thing is that these suburbs are still in relatively close proximity to the city, with most falling within a 10km band of the Perth CBD.”

Perth property selling like hotcakes

The pent-up demand in rentals has obvious effects on the property market, and potential buyers are circling for the next deal.

Nationally, the number of enquiries per for sale listing increased 14.1% year-on-year in September but remains below the record high levels seen in late 2021, according to PropTrack data.

In contrast, enquiries per for sale listing in Perth have jumped by 93.9% year-on-year and are sitting at a record high level, reflecting both strong demand and the lack of properties for sale.

And this is just counting the statistics for the sales listed, with many investors opting to buy through buyers agents off market.

“It's causing a lot more people to buy. Firstly, investors are jumping in because the rents are good and even though the prices are up, the yields are fantastic,” said Flynn. “I have some clients who are getting 11%-12% yields, which is absolutely crazy.”

But it’s not just investors Flynn has seen flocking to the market – although they had certainly helped Perth homes sell in record time with the median being just 12 days, the fastest since REIWA’s records began.

“I'm personally seeing a lot more owner-occupied buyers and they're buying in those price ranges because that's where the government incentives are.”

Western Australian first home buyers receive a stamp duty discount on properties valued up to $530,000, and a stamp duty waiver on properties valued up to $430,000.

“You're always trying to buy the cheaper ones to save on the stamp duty,” Flynn said.

“And then the Family Home Guarantee and First Home Guarantee schemes cap out at a purchase price of z$600,000 for Perth Metro, so that sub-$600k space has been really busy because people are literally not able to find a rental.”

REIWA’s statistics also backed up what brokers were experiencing on the ground, with the most sales activity in the last year falling in the $500,000 to $1 million price bracket.

REIWA CEO Cath Hart (pictured above right) said there was “strong interest in the lower end of the market”, and this was highlighted by how fast properties in this price range were selling.

According to Hart, houses are “selling like hotcakes” and the number advertised on www.reiwa.com hit a 30-year low of 4,931 at the end of September, well below the 12,000 that is considered a balanced market.

“The majority of the fastest selling suburbs in our end of month reports tend to be under the Perth median house price and the fastest selling suburbs for the 2022-23 financial year were all priced well below the Perth median house price,” Hart said.

More growth to come for WA

With home prices up 9.24% over the past year, according to PropTrack, Perth is Australia's top performing capital city market when it comes to price growth.

However, with the city coming off a low base characterised by a number of years of negative growth and stagnating rent, Flynn said Perth’s rise was just getting started.

“The recent upward swing in the WA property market is likely caused in part by a market correction. When viewed over a longer period, such as 15 years, the market appears to be flat. In fact, we are only just above where we were in 2012, the last boom,” Flynn said.

“While I expect WA to continue to prosper economically in the next few years, I am not so confident about the other capital cities.”