After a year of unrealised hopes for recovery, it seems that 2020 has started well for Perth.
CoreLogic’s Home Value Index for January 2020 indicated that over the three months to January, the capital finally recorded its first positive rolling quarter since May 2018. Rents also inched upwards over the last 12-month period.
“We’re getting more optimistic over 2020. We’ve seen the stock for sale drop by about 25% over this time last year – it’s now down to about 12,500 properties for sale as of the middle of February,” says Damian Collins, president of the Real Estate Institute of WA.
“We’re expecting between 6% and 10% rent growth, and that’s because we have seen a return to population growth with migration from overseas improving. Also, the number of people leaving the state has dropped off dramatically.”
Oversupply played a big role in Perth’s inability to get back into a positive groove in 2019, and with stock levels falling, this is expected to help sustain a gradual process of recovery.
“We thought the market might have started to flatten out earlier in 2019, but it didn’t, and one of the reasons was that there was too much stock for sale. Now, a lot of the stock has sold or been put into the rental market,” Collins says.
The decline in property prices over the last five-plus years has contributed to an increase in affordability, and with the rental market tightening, tenants could be making the switch to becoming owner-occupiers and investors.
With the mining sector gaining ground again and a number of projects in the pipeline, there are a lot of opportunities on the horizon. However, Investwise managing director Daniel McQuillan does warn fly in, fly out (FIFO) buyers against overstretching themselves as in the last mining boom.
“Poor financial planning and the wrong choice of properties contributed to many FIFO workers in WA ending up in mortgage stress following the end of the last mining boom,” McQuillan explains.
“Buying property is about holding property long-term. FIFO workers who have managed to hold on to their properties during the downturn since 2015 will reap the financial rewards with the expected recovery in the state economy.”
SUBURB TO WATCH
BENTLEY:
It’s not a massive upswing, but Bentley’s house values inched upwards by 0.5% in the year to February 2020, which could be a sign of things to come.
The median price remained below $500,000, so this suburb remains affordable for those looking to buy in this market. While unit prices plummeted by 10.7% in the same period, rents were up by 3.2% to reach a weekly advertised rate of $320 as of December 2019. Yields were also reasonably strong at 5.4%.
Over 60% of residents are tenants, which works to the advantage of landlords. Young singles comprise the majority of the population.
Rent: Landlords benefit from more than half of the population being tenants
Growth: Following a long period of steady decline, Bentley’s house market inched upward
