A combination of tightening sales stock and rising buyer demand is prompting price growth across a growing number of Perth suburbs as the market resumes its recovery, according to WA-based property investment consultancy, Momentum Wealth.
The western capital recorded six consecutive months of price growth in early 2020 (CoreLogic), but activity subsequently stalled due to the COVID-19 outbreak.
Chair of Momentum Wealth’s Residential Investment Committee, Emma Everett, said the market is now showing renewed improvements as lowering sales stock and rebounding buyer demand drive increasing levels of buyer competition.
Data from the Real Estate Institute of Western Australia (REIWA) showed there were only 10,686 properties listed for sale across Perth in the week ending 20thSeptember – a decline of 23% from the same period in 2019.
“At the same time, Perth has recorded a sustained increase in buyer activity in the months following the easing of COVID-19 restrictions, with sales activity trending 40% higher in August compared to the same period in 2019, which is putting further downwards pressure on stock levels.”
“These conditions are translating into an increasingly competitive market as buyers in high demand areas compete for a reducing pool of properties, with our buyer’s agents regularly noting higher attendance at home opens and multiple offers from buyers for high quality stock in our preferred suburbs,” Ms Everett said.
Some segments already growing
While yet to flow through into resumed headline price growth, these conditions combined with suburb-specific demand and supply factors have already translated into improvements across a number of market segments in Perth, with REIWA reporting that 45% of suburbs in the western capital experienced increases in median sales price across August.
Ms Everett said this was particularly evident in suburbs where tightening stock levels and limited oncoming supply had been accompanied by strong demand signals from buyers.
“While the average days on market for properties in the Greater Perth region was 50 days in the 3 months to June 2020, we’ve seen other areas record days on market as low as 20 across the same period, particularly where these tightening stock levels have been accompanied by high online property views,” she said
Kingsley, Beldon and Mouth Hawthorn were amongst a number of suburbs to outperform the broader market for both days on market and median sales price, with the suburbs recording price increases of 6.3%, 4.0% and 6.3% respectively for houses in the year to June 2020, where the median sales price in Greater Perth declined 3.1% across the same period (REIWA).
Ms Everett said it’s an important reminder to investors to look beyond headline statistics.
“While a lot of buyers, particularly those situated in the Eastern states who aren’t seeing what’s happening on-the-ground, may be waiting until they see broader growth, in reality we’ve been recording leading indicators of this for some time in Perth, and it’s already translating into price movements across the vast majority of investment-grade suburbs,” she said.
Conditions aligning for investors – but opportunities could be time-limited
Ms Everett said while activity remained primarily owner-occupier driven, savvy investors were already turning their attention to Perth as conditions ripen.
“As it stands, these improvements are primarily being driven by owner-occupiers and first-home buyers, however we are starting to see interest from investors who recognise that conditions are ripening and the market is already moving, and we expect it’s only a matter of time until others follow suit, particularly once we see broader rental growth” she said.
Momentum Wealth’s Property Management Team Leader, Amanda Kroczek, said while the extension of the COVID-19 emergency period in WA meant that rent increases remained temporarily prohibited for existing tenancies, rents were already on the rise for new tenancies.
“With rental vacancy rates reaching a 12-year low in Perth and rental stock continuing to tighten, our property managers have seen a significant rise in tenant competition on-the-ground, which in many cases is resulting in rent increases for advertised properties as tenants are offering more to secure their property of choice,” she said.
Perth recorded the highest annual rent increase of all Australian capital cities in the year to July 2020 according to national research firm, CoreLogic, with rents rising on average 2.9% while the combined capital city average remained unchanged.
This comes as Westpac economists recently touted Perth as one of the highest potential markets for capital growth, forecasting18% growth for property values by 2023.
Ms Everett said that when combined with the relative affordability of current conditions, this is presenting excellent opportunities for investors in a position to enter the market.
“Perth’s relative affordability, improving rental conditions, and early growth indicators are providing ideal conditions for investors with the right property selection criteria to enter the market at a reasonable price point and at a strong yield while positioning themselves to leverage future market improvements,” she said.