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There’s an undercurrent of fear due to crucial changes about to happen… Many are asking if we are in a bubble that will soon burst?
Despite that, we’re seeing a lot of momentum in the Perth property market.
In my March 2021 Perth Property Market Update, I want to go over the sale and rental market plus some new areas I haven’t touched on in previous updates to directly address the concerns that I am hearing from our clients.
I’m going to look at what is really happening as we’re heading towards the end of the moratorium. I’ll also dive into the current level of business confidence, the end to job keeper, expected loan default levels and the risks from heavy exposure to China and the mining sector.
Don’t miss out on this very important update by tuning in now.
- What’s happening in the Perth Sale Market [02:12]
- Continued supply tightening in the Perth sale market [02:18]
- Week-on-week sales hit a new record [03:56]
- New inventory stat shows we’re down to 2 months of inventory [04:33]
- Improvement in house sales & median price [05:33]
- Leveling seen in unit sales & median price [06:14]
- Land sales and median price relatively unchanged [06:59]
- Average selling time at an all-time low [07:53]
- What’s happening in the Perth Rental Market [08:29]
- Continuing decrease in properties for rent [08:35]
- The vacancy rate shows a 64% decrease compared with last year [09:47]
- Average rent at $365 [10:13]
- Perth is now a rising market for houses [11:26]
- Now is the time to buy units [12:13]
- Factors Affecting the Market [12:51]
- Low interest rates expected to continue [12:58]
- Low mortgage arrears in Western Australia [14:36]
- Worst suburbs for mortgage arrears [16:06]
- 3x normal levels for first home owners grant activity [17:06]
- Top locations that received first home owners grant [18:45]
- Current business confidence shows a lot of optimism [19:13]
- Risks from dependence on China [20:17]
- Risks from dependence on mining [22:09]
- Not much changes in government policies [23:13]
- Changes once the moratorium ends [26:04]
- Stats on the Job Keeper that is also ending [30:44]
- Tips to survive and thrive [34:00]
- My crystal ball for the next 2-3 months [35:54]
See Transcription and Graphs Here:
Gday and welcome to Perth Property Insider. I’m your host, Jared Mahon. And today I’m really excited to be back to you with my Perth Property Market Update for March 2021. And today, I’m covering off all the usual’s of what’s happening in the sale market, the rental market, my crystal ball, and actions to consider. But I’m also going into a few new areas, which I haven’t touched on. And I produce some really exciting research, which I think is going to give you a real feel for what else is happening below the scenes. And I guess what prompted this research is I, when I’m chatting with clients, there’s a lot of kind of undercurrent of fear. What’s going to happen when the moratorium ends and are there a lot of tenants going to be in rental default?
What’s going to happen when the bank deferrals of loans and how many people are actually going to be in arrears? What has been happening in the first home buyer activity, and are too many tenants going to be moving out? What’s the sense of business confidence, and what are the risks to China and the mining sector? So I really wanted to touch on all these areas, and we’ve also obviously got job keeper ending, which is another factor that I’ve thrown into the mix. And I’m really excited to give you a feel for them. So let’s go inside.
Welcome to Perth Property Insider, where you will learn how to grow your wealth and improve your life using Perth Property. Our show is brought to you by Investors Edge Real Estate, the highly rated and award-winning property management specialists servicing the whole of Perth. Now here’s your host, Jared Mahon.
Hey, and welcome to my Perth Property Market Update. And I’ve titled things today, Onward and Upward, because boy, oh, boy, we’ve been gathering so much momentum since I came to you two months ago. And how have we had so much happened to start the year. We’ve had our election just get out of the way. We’ve got our moratorium ending, got so many other things to tell you about. So let’s get stuck into it.
Houses for Sale
Now in the Perth sale market, take a look at that graph and the slope of that thing. It’s just continued a downward trend of tightening up in the number of properties for sale. So such a limited number for sale at the moment. Anyone that’s out there looking would know just how quickly stuff’s selling when it comes on. We’ve got just 8,135 properties for sale. Now, that’s a record low since I’ve been recording back in 2013, and we’re significantly below those levels now by almost 10%.
So we’ve seen things decrease in the supply by 24% since September last year, six months ago, and 36% down on a year ago. So I expect the supply to keep tightening and to get even tighter in the coming months. Why? Because we’ve got a lot of new buyers entering the market, tenants wanting to get out of their rental increases, investors coming into the market, from both Perth and over East. And a lot of owners are still waiting for their prices to get back to what they paid often in 2013. 2016 is a couple of peaks in the market. And people in the outer areas have typically lost 20% and things are back up 10% to 15%, not quite back at 20%. So when we start seeing them get better back to their point where they feel like they can exit and recover what they’ve paid, that’s when we’ll see a lot more properties come on. We’re probably six to nine months away from that point. And things are going to be very tight until we get there I think.
So with the number of properties sold, we’re continuing our trend up in number of sales happening week on week. We had a huge week, huge few weeks, and we’ve hit a new record of 1,020 sales happening in a week. Last week, we only got above that a few times in all the time I’ve been tracking. One time when we had the land, building grants announced where we were at 1,300 sales a week. And a few times we hit this back in 2013. So great momentum and properties are certainly getting sold a lot every week.
Now, I’ve introduced a new stat and I really love it. It’s called inventory. And what it does is it shows us at the current rate of properties being sold, how many months of inventory or stock do we have on the market based on the supply that is there? It’s a really good measure because it gives you a feel for, if you go into the cupboard and the cupboard is bare every time a property that comes on market, there’s going to be even more pressure around it for price. So you can see that we are at a peak of close to 10 months worth of supply on market back in January of 2019. And we’re now down to just two months of supply, and that has been continuing to decrease month on month lately. And it’s probably going to go tighter still, as I just mentioned. So just two months of available stock on market, compared to the rates that properties are being sold up.
Median House Price
Now, the Perth house median price has shown a steady increase now since then the September quarter last year. So I mentioned to you previously that the median house price is a lagging indicator, and we typically see all the others showing signs of improvement before the price does. And we’re now up to $488,000, and that’s definitely going to continue its trajectory upwards. And anyone that’s buying in some suburbs will know the median price does trail what things are actually being sold for. So it takes a bit of lag to see where the true reflection of that is.
Median Unit Price
Now, when we look at the Perth unit sales, that looks to have certainly leveled now at $375,000, but we haven’t seen it tick back up again yet. And I think we’re probably a month or two away from seeing that, because Herron Todd White has labeled units now as being, I think, at the bottom of the market, or it could be around in a rising market. We’ll check on that in a minute, but everything that I’m seeing suggests that units are about to have their day. And I’m not talking massive increases initially. Like we’re seeing in the housing market, but there’s certainly some pressure coming around units, especially those areas that are in demand and in great locations, close to cafe or lifestyle areas.
Median Land Price
When we look at the land, we’ve just been drifting now for the last few quarters, really relatively unchanged at $240,000. I don’t expect much to happen at all on the land side. And if you asked anyone if they wanted to build, the answer would be no now with the amount of congestion and difficulty the builder’s going to face ahead, just delivering on what they’ve already committed to. No one would build unless you’re crazy at the moment. And when I say that, I mean if you haven’t already selected to build a new house, sure.
If you’ve got the grants and stuff, that’s going to be worthwhile, but all of the buyers are now coming to establish properties because they don’t want to go in a massive queue and probably wait two years to end up with a build. So that’ll calm down in six to nine months when the builders can get on top of things and things will start getting back to a new normal. When we look at the average selling time now, wow, this stat has gone from 60 days, average time on market, back in March of 2019. And we’re now at just 23 days. So that’s like a third the selling time. And when we say median time on market, that means half the properties are selling quicker, probably at a week. And half of them are selling still longer at probably four or five weeks. So things are really, really tight. And I certainly haven’t seen it at these levels before.
Number for Rent
Now, Perth rental market, let’s go into this. So similar to the sale market, the trend is continuing. We’ve had a 12% decrease in the number of properties for rent over the last six months. And we’re 50% down on March last year. So I actually expect the rental market to get even tighter in the coming two to three months. Why? Because the moratoriums ending. We’ve got a lot of owners sort of wanting to move into their properties and/or get their properties sold. And I for one, I’ve got 12 listings coming to the market over the next month or so. That’s all because we’ve been waiting for that opportunity to sell. So in the meantime, in the short term, it’s going to take properties off of the rental market.
And it’s just going to take some time for investors to be adding properties back on as they purchase them. And now that the moratoriums up, it might give investors a bit more confidence to buy, knowing that we’re able to evict the tenants again and increase rents again. And a number of other things which we’ll cover off in a minute.
So number for rent is likely to tighten up even tighter in the next two to three months. And that’s going to keep putting pressure on prices.
So the vacancy rate, and I’ve predicted this to be at 0.8% to March using a number of other sources. And the official rate has been at 0.8% to December. So yeah, 64% decrease in the vacancy rates since the same time last year, just massive. Went from 7.6% at a tie to now at 0.8%.
Median Rental Price
So the median house rental price for our portfolio is $365 at the moment.
So that $430pw is a real strong indication when we look at what it is likely to be for the Perth wide.
So as we pass on all these rental increases, I expect our portfolio to move towards $430 per week over the next six months. It’s going to take some time to pass on these rental increases and to manage things through. Of course, we’ll be doing it as soon as possible and case by case situation. So we’ll be in touch with you on that front, but you can see that we’ve had a 15% increase in the price since March of last year and 10% since March last year and 10% since September. And to keep in mind, we’ve come from 480 per week. So if we can increase by another 10%, we’ll be back to where we started, a bit more than 10% but 10, 15% we’ll be back to where we started. So we’re at 430 now and that’s my predicted based on other sources to March.
Property Clock for Houses
So property clock timing now, I did touch on this. We’ve moved around into being a rising market.
So when I last came to you, we would have been in a starting of recovery. So Perth housing market is now around and officially in rising market according to Herron Todd White. And some of our country areas have also moved around to bottom of market, so Albany, Geraldton, around in there. And you can see that Sydney and Melbourne have moved around to their starting of recovery. So, god, they move through their cycles quickly, don’t they? And if you’ve seen the predictions, pretty much every capital in Australia is likely to have at least eight to 10% growth. And I would certainly be expecting more for Perth at the top of that list.
Property Clock for Units
So when we look at units, Perth, that’s what I was referring to earlier, has moved around to being in the bottom of markets, so that’s a good sign. There could be some interesting buying opportunities there if you do want to look at a unit. I guess keep focused on location and uniqueness, don’t buy in massive complexes that have higher strata fees. And if you can pick up something now at the bottom of the market, it might be the right time to do that. Sydney has moved around into a bottom of market phase as well and Gold Coast has moved around into rising markets since we last looked. So factors affecting our overall market.
Now I’ve got heaps to cover in this section and a lot of interesting stuff to tell you about.
When we look at the availability of finance, rates have held steady since November. But we’ve seen a number of banks in Westpac has led the way, decreasing the fixed rate that they’re offering. For three years, you can now get 1.79%. So wow, that’s like…
So you really should be under 2.5% ideally and if you consider fixing with your broker or lender, then you could be under twos now. Crazy. So I’ve been waiting for this time to come for a long time and it’s really going to signal the increasing of money into the markets. And that’s the changes to responsible lending occurring this month. So lenders won’t have to scrutinize as closely and we’ll have to wait and see what that actually looks like and if it is easier to get finance. But god, my lending experience was particularly painful. The kinds of things that they’re asking for often have no ramifications on the larger picture of what you’re doing. Yet, you’re being put through the hoops, dotting I’s and crossing T’s and it’s really painful. So hopefully, we can make that whole process a lot easier if not be able to borrow more money quicker. So I mentioned in previous episodes that low rates are forecast for the next three to five years.
That should give investors and homeowners confidence that they’ve got some time to get on top of their loans and for the market to come up over that period too. So now I’ve done a study into mortgage arrears and thankfully, we’re in a relatively great place here in WA.
And also there’s a lot of fear around the mortgage arrears and I guess to date, we’ve only seen a marginal increase from 1.28% of all loans, 12 months earlier being in arrears to 1.37% in December. But that is because the deferral of loans is masking probably the true state of where arrears might be. But now that all the deferrals are coming to an end in March, we’ll start to get a clearer picture of what this looks like in the coming months. But to give you an idea, Victoria has got one of the worst situations of hardship in Australia, followed by New South Wales, then Queensland. Bottom of the list here with WA at just 8% of the overall deferrals and South Australia at 4%. So South Australia and Western Australia relatively looking really good as far as the deferrals.
And you’d imagine that some or at least a portion of these deferrals in each state are going to be changing into arrears. So great that WA’s got such a low portion even deferred that are likely going to move across to being in arrears. So 10 worst suburbs in Australia for mortgage arrears. Now, I found this really interesting. Five of them are in WA and when we look through the list, Forrestfield is the second worst suburb for arrears in Australia with 5.58% of loans in Forrestfield in arrears. Byford is closely behind there at number three at 4.9%. And then we’ve got Binduli, I don’t even know where Binduli is. We certainly don’t manage anything there. And we’ve got Cloverdale and Maddington. So one, two, three… Oh god, there’s six in the top 10. I missed one of them. So yeah, some trouble in those areas I would imagine and it really is reflective I guess of people being in the lower socioeconomic areas being harder hit by certain industries. And I hope people can get their situation sorted and get on top of things.
First Home Owners Grant Activity
Now, this is the first time I’ve looked at these sorts of stats, just to get a feel for how many people did end up building. Now, we were tracking at 450 to 500 First Home Owners Grants being issued per month. And then we saw, we started to see a bit of a rise, definitely since the building grants were issued. And we went from that 500 odd a month up to we’ve hit our peak recently at 1,642 in December, 1,500 in January, 1,585 in February. So we’re at around three times the normal levels of First Home Owner Grant activity.
I guess we expect to see this starting to decrease because the First Home Owners Grants are only for new builds. So that’s going to have a steady decrease in the coming months as everyone gets their grant approved. So at three times the normal levels, that is going to see some tenants washing through out of renting in another probably 12 to 18 months realistically, could be longer for some tenants. So I’m really not worried about that.
And when you see that it’s not massive, massive levels, so I think it’s all going to be relative to, we’ve got a lot of incoming entrance. We’re going to have a lot of new people wanting to rent over this period, so it should all balance out but we’ll have to see. You’d expect there’ll be some softening in rental prices in 12 to 18 months’ time when it happens. And when we look at the 10 locations that have received the majority of the grants.
Now, this was interesting. So this was for the year-to-date, we had 275 grants to Brabham, then Baldivis, then Wellard, then Piara Waters, and then Aveley. So Brabham, Baldivis, and Wellard were the top three where all the land purchases have been happening. Now, I have dug up the latest chamber of commerce stats, which gives us a real insight into how business confidence is going. And excitingly enough, the short-term confidence is at the highest level for businesses since December 2007, which is absolutely amazing and shows just how much optimism there is out there.
Policy Changes & Impacts
Had our election now, we’ve got a stable government in labor reelected again, whether you agree with it or not. The majority of West Australians seem to want them to continue and you can see that there are going to be some impediments, I guess, to confidence. So some people, one in three businesses identified skilled labor shortages as being a challenge and the largest barrier to growth. Yep. You will see some pay increases certainly happening for people and that can wash back through the economy and through the property markets as well. So it’s only going to help real estate.
Dependance on China
And when we start to dive a little bit deeper and I wanted to address clearly the chamber of commerce has been addressing what are some of the potential risks to our economy and to real estate in general. So they’ve focused in on the dependence that we have with China and you know that there’s the various trade wars going on. It’s hard to know how serious these may get and certain industries such as the barley, the wine, the lobsters have been affected already.
And the survey that chamber of commerce did was what proportion of annual revenue was dependent on China trade and they’ve looked at it for the various industries. So the resource industry indicated that 40% of our revenue is dependent on China. So we’re massively exposed on the resources side but thankfully or unthankfully enough, China really needs our resources in order to keep their recovery going. So I don’t see us being threatened there from them. But some of the other areas such as agriculture that relies on, looks like 18% manufacturing, 20 odd percent retail trade, 22%. Some of these other areas may cause to have pressure on them as the trade war escalates. And hopefully, we can start to find some resolutions to this.
I know it’s a complex issue and I don’t pretend to understand all the ins and outs but it is worth understanding that it’s going to have an impact on us one way or another. Is it going to slow us down? Probably slow us down a little bit but the momentum that we’ve got is too great, in my opinion, that-
But the momentum that we’ve got is too great in my opinion. There’s likely to be nothing that will stop us now, having this next boom period.
Dependence on Mining Industry
The other factor the Chamber of Commerce investigated was the dependence on mining now, where mining is now accounting for 43 per cent of WA’s economy in 2019-20, which was a record high. We definitely have to acknowledge that if mining doesn’t go well, we’re not going to go well as a state. Our recovery would be short-lived. I can’t see that happening with all the various economies of the world getting going, getting their projects going, needing our resources, so it’s very unlikely, but this survey went into how dependent are other industries on the WA’s mining sector. You can see construction was 65 per cent dependent on mining going well. Retail trade, 65 per cent. Real estate was 62 per cent dependent on mining going well. Huge numbers, and clearly mining is ever the most important thing that we rise and fall on.
Policy Changes & Impacts
Now, policy changes and impacts, it was really disappointing that neither political party had any policies relating to real estate reform. It would have been a real opportunity to make that an election point, but I guess Labor just wanted to keep playing a straight bat. I’m not too sure I saw anything much of substance as far as policies go coming out of the liberal camp, which is probably why they failed to get so many votes. But hopefully now that Labor has been re-elected, we can start to see some reform around stamp duty and off the planned concessions. Watch this space, and I’ll keep an eye on it. I know Ray was continuing to lobby them about those few reforms that I think are very much needed.
We’re seeing our borders being a lot more open now with interstate migration becoming easier, so that’s really going to help people moving in and getting over to us. It’s now clearer than ever, now that we’ve got the interstate migration happening, that we need an overall well-thought-out plan for international migration. We can’t handle the volume that’s even coming in from interstate. We need to look at things like privatizing the quarantine setup and providing greater assistance to international migrants on settling and housing and trying to make the process easier for them. I think the state that does this first and does it really well is going to capture a greater piece of the international migration pie. Really key that our state government gets cracking on this. The federal government might be working on a larger plan to help this overall because the states are in charge of it at the moment, and that’s I think hamstringing the whole of Australia, so we need to open up our international borders, make it easier for people. Hopefully we can be the first to do that.
When we were leading up to the election I saw an interesting post that Labor made. I’m sure that they were just building up their election campaign. I’m sure there’s some truth to it as well. The heading in the Australian was that West’s budged outpaces the rest of the world and that West Australia had recorded the best budget performance in the world through the pandemic, and that was rated by the S and P sovereign analyst. WA looks to be outperforming all as far as we can see. That was a real feather in the cap for Western Australia, just how well we’re doing as a state with our budget. Boy oh boy, if the East Coast investors don’t see that and want to come and buy here, I don’t know what’s going to make them.
End to the RTA Moratorium
Now, I’ve been waiting, waiting, waiting for this residential tenancy moratorium to end, and we’re right on the cusp of it as I record now, ending on the 28th of March. What does that mean for landlords and tenants? Any tenant already in arrears has to go through the mandatory conciliation and can’t be terminated yet through the normal processes. That’s any tenant in arrear or already in arrears at the 28th of March. Thankfully, my portfolio has been a good representation of the overall because we manage typically in the 300 to 600 per week range. We’ve got a good spread. We’ve obviously got a lot of properties higher than that as well, but our portfolio’s often being representative of the Perth-wide rental portfolio very well. We’ve only got five tenants affected, in arrears, out of 735. When I say affected, I’m talking about affected by COVID-related things. Very small percentage, and God, if you were looking on Facebook or the news and you’d see the buildup over how many tenants are still struggling and in arrears, they certainly make it seem like massive numbers, massive percentages, but very, very small.
My heart obviously goes out to the five of our tenants that are in that boat and all tenants out there that are still affected, but thankfully most tenants are taking responsibility for things. They’re dealing with it as it comes up. They are making the changes necessary, and obviously if you’re in arrears and you can’t afford your rent and your job situation is not changing, you’ve got to look at where else you can go, who else you can move in with, make some difficult choices in the shorter term until you can get yourself back on your feet.
Any tenant falling into arrears after the 28th of March, we can then terminate them, evict them as per normal. It’s looking like we’re going to have a new conciliation process before we go to court, which might actually help ease the burden on the courts, and that conciliation is looking to stay. I think it’s a good thing. We’re able to obviously now start passing on the rental increases to existing tenancies. We’re seeing a 10 to 20 per cent rise of rent on the average tenancy, and the timing for doing that is either we’re issuing a notice to have that increase on the 29th of March, but if the rent was due to increase anyway within the next couple of months, we’re typically waiting one or two months to increase it so that it falls within the normal rent review period. We can only review rents on properties every six months, so if you wait one or two months, we can get higher, and then you’ll have it for the next six months until we renew the lease.
One of the things that’s worth understanding as well is that at a rent review, we have to provide justification and data to show and substantiate what that rental increase is. It’s often meaning that we can’t increase it at a rent review as much as we can at an end of tenancy. At an end of tenancy you can ask whatever rent you wish and be more… When we’re pricing properties for the open market, we take a good look at what things have rented for, and then we increase that price and go to the market higher at the moment, but we can’t take that approach for our rent reviews. We have to look at the data and pass on only what we can justify. Little bit of confusion around that with some of our clients. We obviously want the rents to increase as much as we can what the tenants are also able to pay, so we’ve got to ask as much as we can, and then we can enter discussions to see what’s manageable for the tenant.
Some of the other changes now that the moratorium is ending is the tenants can no longer end a fixed-term lease without penalty if they are affected. They can’t just give 21 days notice and vacate, and landlords do have to carry out non-urgent maintenance again as of the 28th of March. Finally, the other huge change is that owners are able to end, give notice to end tenancies at the end of their leases now. That’s definitely going to result in a lot of owners moving and selling and a lot more flexibility in our market, and ultimately we’re going to have a decrease in the rental stock available over the next two to three months, I believe.
End to Job Keeper
JobKeeper also ending on the 29th of March. It’s interesting, I’ve gone into and found some figures as to how many people are actually on JobKeeper, and we had 1.5 million employees on JobKeeper to December of last year. That was compared to 3.6 million from April to September. We had about half the people on the end of the year than when it started. Western Australia, the Northern Territory, and South Australia had the largest percentage of workers coming off the payments, so great news for WA again there. We’ve got great news on the mortgage deferrals, great news on the JobKeeper being such a lower percentage compared to the other states. You would notice that the payment had dropped to 1,000 a fortnight in January from the previous amounts. They’re phasing it out. I actually expected 2.2 million people to be still on JobKeeper at the end of JobKeeper, so we’re going to probably be, you’d think, hopefully under 750,000 people that would have still needed JobKeeper. That’s my estimate by the end of March when it comes to an end.
One of the mechanisms the government’s put in place is these small medium enterprise recovery loan schemes. That can give businesses that are still struggling some funding options and help prop them up so that they can get through this next period with JobKeeper ending. That will certainly be the next option for businesses that are close to getting back on their feet but not quite there. When we look at the various drops in JobKeeper usage by state, we can see that West Australia has had the highest drop of people on JobKeeper. 70 per cent of people had dropped after December, whereas Victoria at the other end of the spectrum had only 44 per cent drop off. We’re substantially in better shape compared to the East Coast, and that’s going to start showing up in all kinds of areas from the economy to housing to rental evictions, et cetera, et cetera. Thankfully we’re in a much better place, and you can see here that I’ve gone into and shown the number of people on JobKeeper by industry. And it was just interesting to see which industries have been much more significantly affected. I mean, most of us would know that the accommodation food services side has been affected, but that I didn’t appreciate that construction had been so badly affected. So, I had 420,000 people on JobKeeper in the construction side. But hopefully, with the building grants, getting that going, Oh God, for us to try to get any trade in Perth at the moment’s becoming very difficult.
And the other one that was interesting was the professional scientific and technical services had a huge number of people affected as well with 450,000. So, between those three, they were the top three areas of what was affected. And I didn’t expect construction and professional and scientific services to be in there, in the top three. So, check out my slide if you want to see the other areas that have been affected.
Now, tips to survive and thrive. So consider, definitely look at upgrading your home or buying an investment property now. Don’t wait if you were planning on because the prices are going to be significantly higher. Buy in the best area you can afford and make sure you get into the market sooner rather than later.
Where to buy? Listen to my episode 13 on the podcast and see just how important capital growth is. So you really want to go about choosing your suburbs to have the highest potential for capital growth. And I’d be doing this with your home as well as your investment property. And if you want my input on suburb selection, go and book a strategy session, and we can go through all the ins and outs and help you with that side of things, choosing a suburb that’s going to perform. So I’ll give you the link at the end of this episode.
Now, most properties have already increased 10 to 20% from their low point. And if you have been thinking about selling, now is definitely a good time to look at doing so. Have a chat with me, get an updated appraisal. And also, with these increases, depending on at what point you last refinanced, but it can be worth starting to look at getting equity out if you want to do some investing or upgrading of your home. So, going to be a lot easier to substantiate values and get equity out if you do want to keep your property and do more things now.
The other action to consider here is ensure that rent increases are passed on in the next three months at the maximum. And keep in mind, you can only increase every six months. And I did mention that it’s harder to do at rent review. And at lease renewal, we can ask any amount and negotiate that through.
My Crystal Ball
So, my crystal ball for the next 12 to 24 months. I’ve updated this a bit. It’s pretty consistent with what I’ve been saying over the last six months, but I’ve added a few more shorter term things into here to give you some clarity. So, I think vacancy rates will drop even further over the next two to three months.
As I’ve mentioned, as owners move back in and sell to take rentals off the market, rents will increase 20 to 30% over the next 12 months. So I think we’ll be back to the levels that we were at, at 470 average when we hit our last peak. We’re definitely going to be back there soon. And we’ll see some easing when tenants start to move into newly built homes and as they also start moving into established and buying more. So, they’ll be getting out of renting and easing that increase.
There’s definitely going to be a lull in land. And I’m seeing that already in new home sales from now on. Probably at least for another six to nine months. The sale market supply, I think is going to tighten even further over the next six months until the values get back to their previous highs. And I’m having a lot of discussions with owners already who are saying, “Jarrad, yep. I’ve got my figure that I want. Keep me in the loop. When we get there, we’ll make a plan to go to market and sell.” A lot of people are in that boat, but prices are also working for some people to sell now and move on with the next plans.
So, investors have started coming back to the market and we’re seeing real recovery with the investors getting in. Thankfully we’re seeing a lot more Perth-based investors now starting, but the majority are still coming from the East Coast. Established homes and units in the more affordable areas are starting to experience the growth again. So, we’ve got increased investor and home buyer demand. And that’s getting fueled by the tenants wanting to get out of renting and the investors coming in now finally in greater numbers. So I’m expecting at least 10% growth for 2021 in the lower end areas. I expect to see prices rise 15 to 20% in the well-located coastal and established areas with good schools.
Immigrants are being drawn back into Australia. And I can’t wait to see the international borders open up in a bigger way and really kick our markets into high gear when we start seeing them. There are a lot of overseas expats and immigrants that are buying properties ahead of when they’re moving to. So, we’re getting a lot of higher end rental properties to manage where the owners are intending to move in for the next 12, 18, 24 months. And they’re buying now ahead of when the market goes up. And I think that’s a real smart move.
Further Help from us at IE
So, for some further help, if you’re considering sale, get a complimentary appraisal. And that’s at investorsedge.com.au/appraisal. If you’re not already receiving my property investor update, jump on there. You get notified of whenever we release an episode of the podcast. And you can get helpful information, property market updates on your chosen suburbs, as well as invited to any of our events and other things that we run. And if you are considering where to buy, what to buy, what to do with your overall portfolio, great idea is to grab a one-on-one strategy session with me. And that’s at investorsedge.com.au/strategy.
So, thanks for joining us. Had a lot to cover there. Hope you’ve got a lot out of it. And if you’ve enjoying our podcasts so far, make sure you jump on and give me a five star review on iTunes. I’d really appreciate that. It’ll help us get found by more investors and homeowners. See you on the next one.
About Our Host:
Managing Director and Licensee at Investor’s Edge Real Estate for more than 12 years, Jarrad Mahon is a household name in the real estate industry. Having received 16 awards over the last six years, he is your go-to guy in property management and investment strategies. He has been featured in multiple media outlets and is continuing to make great strides in the world of real estate investing.
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