Australia’s fourth most populous city is experiencing stunning growth in its rental market, making it a more promising prospect for investment property than ever. The latest figures on Perth’s rental activity reveals that rents are soaring and new supply is being rapidly outpaced by growth in demand.
New Supply Being Outpaced by Demand Growth
Figures released by the Real Estate Institute of Western Australia (‘REIWA’) for the September quarter have shown that new rental leases increased by 6 per cent in the three months to September.
Although new housing stock was released into the rental market rather than being sold, this additional stock was quickly absorbed by strong rental demand, with the number of properties available for lease falling by 20 per cent or from 3,600 to 2,800.
- Preliminary vacancy rate. The preliminary vacancy rate fell by 0.6 percent, from 3.4 per cent to 2.8 per cent.
- Median rent. The median rent for Perth during the September quarter rose by 4 per cent ($15 per week), taking the annual increase to 6.8 per cent.
REIWA’s President David Airey suggested that people were choosing to rent over making a purchase.
High Growth Areas
While the overall market rose 4 per cent, rental increases were not uniform across Perth’s metropolitan area.
- The City of Melville, which includes suburbs such as Applecross, Bateman, Melville, and Winthrop, saw a rise of 8 per cent to $435 per week. This rise was due to strong multi-residential leases.
- The City of Cockburn recorded a rise of 5 per cent, to $400 per week.
Units Nearly Level with Houses
Median house and multi-residential rents both increased by $10 per week overall, boosting the median house rent to $400 per week and the median unit rent to $380 per week. While the REIWA figures suggest a $20 difference, data released by Australian Property Monitors (APM) suggest an even smaller difference between the two categories.
The APM figures puts median weekly rent prices for a house at $380, with the median weekly rent prices for units at $370 in the September quarter. The APM figure show that while the cost of renting a house in Perth has risen by only 2.7 per cent ($10) per week, the cost of renting a unit has increased by 5.7 per cent or $20 per week
According to APM, gross yields soars by 9.1 per cent from September 2010 quarter to reach 5.17 per cent, while yields for houses grew by 11.9 per cent to 4.57 percent.
This is good news for those seeking to undertake property investment in the Perth area, as both houses and units have recorded strong gains over the quarter.
Exponential Rental Growth
Perth’s inner-city market is nearly level with Pilbara prices, partly driven by mining companies seeking accommodation for their staff as they expend their Perth operations.
- Figures from MLG Realty show that furnished two-bedroom apartments can attract up to $950 per week, a rise of 33 per cent from $700 or $750 in the two months since August.
- In the same period, rent on furnished one-bedroom apartments grew from $550 to $650 per week, around 20 per cent higher than the average rent in Sydney’s CBD.
- The same figures indicate that mining companies now hold nearly 56 per cent of the CBD leasing market. Some properties were being rented out just one hour after being advertised.
In the coming year, one-bedroom apartments and two-bedroom apartment are expected to hit $800 and $1,250 per week respectively.