Although recent data shows rental supply is at a record low, this is good news for people looking to sell their homes, especially in state capitals.
New analysis from PropTrack, released on Monday, shows that the number of new rental properties nationally fell by 5.7 per cent in the year to September – the lowest September level of new rental properties in more than a decade.
Total mentions also fell to a record low, following a 7.1 percent year-on-year decline.
This low supply and a relaxation of new construction will not contribute much to the ongoing housing crisis in the country.
But it means house and rental prices in Perth are set to rise, more so than in other state capitals.
The latest PropTrack data shows Perth is bucking the national trend, which will see house prices rise while remaining relatively affordable. Photo: NCA NewsWire / Sharon Smith
Real Estate Australia (REA) Group senior economist Eleanor Creagh said Perth was currently the most competitive housing market in the country.
“With house prices up 10.90 per cent in the past year, Perth is Australia’s best-performing capital city when it comes to price growth,” Ms Creagh wrote in an analysis for realestate.com.au.
“That is more than five times the historical average rate of annual growth in Perth, pushing prices to record highs.”
Ms Creagh said Western Australia also saw the biggest increases in advertised rental prices last year, behind Sydney, with regional WA up 16.7 per cent year-on-year, and Perth up 14.9 per cent year-on-year year.
“The critical lack of available rental housing is causing rents to rise at a rapid pace,” she said.
The low housing supply continues to drive up housing costs. Photo: NCA NewsWire / Sharon Smith
PropTrack data shows Perth has overtaken Adelaide as the market with the strongest house price growth, with buyer demand remaining strong but supply remaining low.
“Limited supply amid strong buyer demand has resulted in a seller’s market, with prices in Perth higher than all other capital cities,” Creagh said.
And while house prices in other states fell due to a rate hike campaign by the Reserve Bank, WA bucked the trend.
“Despite recent gains, Perth house prices remain affordable compared to other capital cities, after a decade of underperformance against east coast capitals,” she said, noting that Darwin is the only capital city with a lower average home value .
“Relative housing affordability, population growth, a housing shortage and very tight rental markets are likely to continue to drive both house price and rental price growth in Perth.”
It’s a positive sign as we head into 2024, as the hope is that more investors will open up more rental properties.
Rental supply will remain low for the remainder of 2023, but that could decline next year as investors return to the market. Photo: NCA NewsWire / Sharon Smith
As for rental prices, Real Estate Institute of Western Australia CEO Cath Hart said supply was likely to remain low for the rest of the year.
“Supply remains the biggest challenge for the market, especially the rental market,” Ms Hart said.
“We have welcomed the government’s recent announcements addressing supply barriers… but while it is important to increase supply, we also need a legislative environment that supports investment.
‘Our market is highly dependent on investors, they supply approximately 85 percent of the homes on the private rental market. They can easily put their money elsewhere – and they will.”
Ms Hart said investors were leaving the market in droves after the Covid eviction moratorium ended and changes were made to housing legislation.
“While the WA Government has ruled out rent caps and rent freezes, investors are cautiously awaiting the outcomes of the Residential Tenancys Act reforms,” she said.
“Despite recent gains, Perth house prices remain affordable compared to other capital cities, after a decade of underperformance against east coast capitals,” said Real Estate Australia (REA) Group senior economist Eleanor Creagh.
The PropTrack report comes as the Australian Bureau of Statistics (ABS) released its latest new home lending report, showing lending to investors in WA increased by 1.6 per cent in September.
CommSec economist Craig James said this means investors still see value in real estate investments.
“High migration numbers and tight rental markets are important influences,” Mr James said of the ABS figures.
‘Investor home loans are not only up (up 2 percent in September), but also up 2.6 percent year-over-year, up for six of the past seven months, as house prices and demand recover .’
The PropTrack report also showed that the average house price in Perth rose to a new high of $575,000 in October, up 0.9 per cent from September and 6.5 per cent from October 2022.
There was also a 2.7 per cent increase in listings on reiwa.com.au in October compared to September’s 30-year low, but that is still 37.4 per cent lower than the same period in 2022.
The average residential rent in Perth rose to a new record high of $590 per week in October – up 1.7 per cent from September and 18 per cent higher than the same period last year.
Average weekly rents for houses and units were stable at $600 and $550 per week, respectively.