The average vacancy rate in Perth's rental market has fallen to its lowest level in over three years, according to recent data released by the Real Estate Institute there.
What is vacancy rate and what does it tell us?
As the title might imply, vacancy rate is the rate of properties that are currently vacant, or without occupant. A drop in this number shows a move towards rental rises.
Damian Collins from Momentum Wealth explained: “It has come from over seven and a half percent down to four and a half percent recently. So, we've seen the number of vacant properties drop from the peak of 12,000 to just over 7,500. So, it is definitely starting to turn. We're not seeing rental rises across the board. On some selected properties we are, but certainly the trend is heading in the right direction. And I'd expect, it's certainly a decreasing trend, and I expect that to continue.”
Is it too early to say that the market has turned?
Despite this drop in vacancy rate, it may be too early to jump the gun and claim the market has turned completely. It is a good indication of what the market is doing, and what it may do in the future, but it is still just that, an indication.
Damian said: “We've definitely hit the bottom as a general market, but it is still in segments. So where some segments, the premium end of the market's already in recovery. The middle tier's probably at the bottom and in some of the new suburban areas, there's a lot of excess supply. They're still struggling along the bottom and perhaps have a little bit to go. So generally across the board you'd say the bottom, but it's a bit segmented in the market.
“The home building market has still, I think, got 12, 18 months to go. That's where we've seen the biggest overs generally in the outskirts, in the new home and land packages. But apartments, look we are seeing owner occupiers certainly come into the apartment market. That's the stuff that's selling.
“So look overall, I think that the new home building market's 12, 18 months away before they'll see much. But developers are starting to feel a bit more confident, but there hasn't, it's been owner occupiers. Investors still haven't come back into the market yet.”
What is investor stock like in Perth at the moment?
There are plenty of investors in Perth at the moment as there is a clear over-supply of finished apartments, leading to a few bargains for people in the right place at the right time. Investors are looking for something that they can develop and make money on further down the line. That kind of potential stock is being snapped up, while finished development stock is still slow.
Damian explained: “The stuff that's in high demand we're finding with our buyers agents out in the market, is anything that development potential. Even though the market overall you'd say it's balanced and it's not super strong, we find that the good quality properties near transport stations, and near infrastructure. We're often finding we're sometimes competing against two or three offers.”
Where are the best investment opportunities in Perth?
As with many growing cities with a growing population, the money grows the nearer you are to the hustle and bustle. House prices always shoot up if you have good travel links, like a railway station nearby, and if you’re close to a city centre, where the action is.
Damian agreed: “Well, Kevin, I'd certainly be saying, as an investor, you know Perth's starting to recover in population growth, depending on whose forecast you read. We're going to be two million now, we're going to be somewhere between three and a half to five million over the next 30, 40 years. It's, you follow the trend of what's happened in Sydney and Melbourne. It's near transport. As the city gets bigger, you want to be near the train station. Then the infrastructure, the amenity, the shopping centres, the lifestyle, the cafés.
“So certainly anything in Perth, you know, close to the beach within 15, 20K at Scarborough I like. There's going to be a bit of a development going on, but I think that's the future Bondi of Perth. And certainly to come back a bit inland on the southern side, it'd be like South Lake, Bibra Lake along the free land and train lines. But in the Northern Corridor, your Warwick, your Craigie. They're the ones that you can still get a decent property for under $500,000 in Craigie and those sorts of areas, and Bibra Lake. It's just something you wouldn't see in Sydney and Melbourne.
“So just focus on being near amenity and transport, that's what's going to give you the growth incentive prices as the city grows in population.”
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