In this intensive Perth Property Market Update I give you my deep insights into the Perth Rental and Sale market by uncovering the factors affecting prices and giving you my action steps and crystal ball on the year ahead. Grab a tea or coffee, I have lots to tell you about… Its going to be very interesting.
- 1:30 Perth Sale Market
- 5:56 Median House Price
- 7:47 Median Unit Price
- 9:18 Median Land Price
- 10:30 Average Selling Time
- 11:03 Construction Grants
- 14:19 Perth Rental Market
- 19:19 Property Clock Houses
- 20:10 Property Clock Units
- 20:19 Factors Affecting our Market
- 31:17 Actions to Consider
- 33:17 My Crystal Ball
See the Graphs & Transcription here
Hello there and welcome to my October Perth Property market update. I am really truly excited to be bringing this to you. Because for the first time in six or seven years, our market is officially around into recovery. There is lots of positive signs in every area from the sale market to the rental market that the recovery is here to stay. We are pushing ahead leaving the rest of the country behind!
So, I am going to take you through all the ins and outs of what I am seeing on the ground, what I am seeing in our rental portfolio, and why I am so optimistic about the future and what it holds after being in slumps, in the gutter, for the last five or six years. Has been a real rough track for all of us, property owners, in Perth. But there is definitely light at the end of the tunnel. We are entering a whole new phase ahead. So, bear with me and I am going to jump into it.
So, finally here, finally around into recovery. In the Perth sale market side, what I am seeing is the number of the sale has been hitting down and tightening up since March last year. As you can see, we hit our peak at sixteen thousand six hundred properties. So, looking back in retrospect, we actually, we are starting to recover from that point onwards.
Number for Sale
We had a big spatter known as Covid thrown in the works in February to March, but as you can see from an overall number for sale perspective, it has continued to trend downwards relatively unchanged with that Covid in the middle. Covid has actually helped probably a bit in tightening up the market and only bringing the sellers to market that have to sell. Unlike the GFC period, we had a lot of support mechanisms from the banks to- not to force anyone to sell. There have been deferrals of loans that have kept those desperate sellers out of the market and only those that wanted to sell have come to sell.
That is down to unprecedented levels. We are now in line with where we were in 2014 and 2013, 2014 is the last time that I can remember that we have had an upswing in our prices and a strong sale market and rental market. You can see we are in line with the conditions that produce those increases in prices and we are certainly seeing price increases in many suburbs already.
I will go a bit further into that. We are fourteen percent down on our number for sale compared to six months ago and twenty-five percent down on a year ago. When we look at the number sold and the trend in that, you can see this. We are starting to trend up again from March, slightly working in a way back up after a very long downward trend in the number of properties being sold week on week.
Then we had our massive drop with Covid. Everyone stopped buying, not everyone but a lot. The market really fell out in April. Then you can see this massive spike coinciding with when we had the building grants and a lot of land came on market that was not actually on before. That is why we did not see the number for sale change too much because a lot of land was sitting off the market and not officially listed. But developers have gone and brought their stages on for sale. I have had my database get in touch that have been sitting on land for a while asking “Can you sell it?”
That is where all these massive numbers of sales has come in June and July. As quickly as they came in that month, the sales are very much dried up in the months since. Especially over the last month, we have found that there are very few buyers for land and off the plan out in the market still. Hopefully, if you needed to sell some land or off the plan or some land packages, you got them away, I certainly got lots of them away for our clients. I am going to go a little bit more into the building grants and what is left for the year ahead. But a majority of buyers have certainly taken them up if they were going to.
What you can see now is we have returned to in line with the highest levels that we have had in these 2013 and 2014 periods. About nine hundred to a thousand sales a week and that is in line with where we might have been had things continued to recover gradually and slowly come back. So, we have had that massive dip down, the massive increase and now we are kind of in line with where we would have expected to be if Covid had not happened. That is still a massive increase in, on six months ago, and a massive increase on a year ago. So, onward and upward we are expecting this to continue.
Median House Price
Now, when it comes to the house median price. Sorry, the median house price. We are at $475,000 and we have been at that for the last two quarters. And I would expect that to slowly start coming back up again. Now, I would expect it to at least be stabilized. And why is this not coming up faster? Even though some suburbs are still increasing but the outer suburbs had been very affected by the building grants. The outer suburbs anywhere that there is land has been distorted by the building grants
Imagine if there was a buyer that would have otherwise looked at the established property, an established house in an area, they have all been tempted to the building grants. And so that has left demand weak for the established houses. And in order for them to sell they had to find where the market is. That kept prices subdued, if not still slightly decreasing in these outer areas and anywhere that there is land around those established houses.
Whereas in the premium suburbs we are seeing strong price increases and very little on the market. And anything that is well located, family-friendly, premium locations in quality areas are all strongly increasing in price with multiple offers at first week. I should know because Karina and I are still looking to buy in those areas at the moment and we are competing against many others when the ideal property does come up. People are prepared to pay for it now. So, it is really going to be a case of a two-speed market over the next six or twelve months.
Median Unit Price
And when we look at the units, I expect they will probably be some slight falls still in the unit side. You will see that the Unit Market still trailing and in a declining stage. So, this is slightly being propped up by the stamp duty discount, stamp duty savings on off the plan properties. So, if you can imagine the average new unit is going to have a higher median price and so it is distorting the overall numbers by dragging that up or holding it up higher because more buyers are buying off the plan because of these concessions available.
But what I will say is when you look through to what makes a unit worth holding and what units have held it up in price. It is those in small complex in prime areas that have not got excessive strata fees.
Preferably a villa over unit in a large complex. Those are doing very well (villas), holding up very well still. Whereas the big complexes where there is not any uniqueness where that- they have lost their new shine and you know, places like Rivervale are a real struggletown. My heart goes out to a few of our clients quite a few of our clients that have apartments in there. It is going to be a long road back.
Median Land Price
So, on the land, I did mention three months ago, I expected this to pop up and I thought it would be interesting to see where we landed because there was a lot of first-time buyers mainly driving the building grant activity and you can see that that has made a steady recovery since March last year as well, but more noticeably in the last two quarters. That has shot up (in price). I expect it is probably going to hang tight around there and until we get the second and third home buyers back buying land and changing where that medium price is.
That was just worth keeping an eye on seeing how the land sales were going for price and where the majority of buyers are headed. Based on two hundred fifty thousand and maybe on those prices someone spends two hundred and fifty thousand on a house. There are at five hundred thousand for their total house value. And that is very much in line with where median prices is heading back for the houses.
Days on Market
Now, this is probably one of the most telling and exciting slides to show that the market is holding up extremely well. Thirty days on the market is the average selling time. So, if that is the average, there is many areas like the premium family suburbs that are selling in one to two weeks and then the outer areas, it is selling in forty to fifty days, thirty days in the middle. Very tight market.
So, the Construction Grants as I previously mentioned in my last update three months ago. We had the State grant of twenty grand, the Federal granted of twenty-five thousand, investors could get the State Grant at twenty, and there was not a lot of criteria attached to the State Grant. It was not means-tested or anything.
One major condition was to enter into a building contract by the 31st of December. And even though we are in October, builders will struggle. If not, they completely impossible to get a building contract together. Now, if you sign– if you would be wanting to sign up for builder now, they will probably turn you away.
I have heard on the Grapevine that over three hundred building contracts have been ripped up by various builders not able to commit to delivering. Which is pretty sad. Overnight, they went from having skeleton crews to, all the sudden needing to deliver on thousands upon thousands of builds and there is going to be a lot of pain ahead. I have sold over a dozen blocks and I have had delays on finance directly caused by the builders on a lot of them. One builder in particular, it is almost criminal what they have done. Knowingly accepting more building contracts that they had no hope in hell of delivering on the time periods. Waiting until the finance periods pretty much up and all the way pretending that they were putting things together. Then to come back and ask for a further ninety days to get it together.
So, really put a lot of sellers in the corner because we cannot go back to the market and find another buyer now and for buyers waiting for their building contract to be delivered and they cannot even get the contract together. How do you think they are going to go when they get to the site but it all comes together eventually. I guess in the grand scheme of things when a buyer is getting forty-five thousand plus ten thousand dollar first home owner grant, they are going to be better off overall and interest rates are incredibly low. At least they are not going to be paying out too much along the way when they do settle.
Not only are the builders slow and it is not entirely obvious is its not even their fault. Their surveyors are slow, their trades are slow, all their contractors are slow. The design teams are backed up, land gate is slow to issue titles. It is slow across the board. Banks have slow, Settlement agents are doing their best to keep up and I guess my saying at the moment as I keep saying to people this month is, “Make hay, while the sun shines.” Because we are so blessed with what we have here in Perth and we are in a bubble compared to the rest of the world.
So, we have really just got to not take it for granted and do what we can while we can.
So, Rental Market. Boy, oh, boy. I never wanted the Rental Market to turn around and be so crazy tight. I mean, we all wanted it to recover. We wanted to see some rental prices come back for all of our seven-hundred clients across the whole of Perth, but I never wanted it to be so difficult for renters to find a place and we certainly did not want prices to come back so rapidly.
And I guess, what is making things worse is the moratorium has been extended, I will go into that more in a second. So, you can see the number for rent is at an all-time low of what I have ever been recording. Well, below 2013 at the low point was three thousand eight hundred. We are at two thousand nine hundred roughly. So massive decreases on six and twelve months ago.
To be honest, I think it is going to keep getting worse before it gets better. So, the only thing that is going to add more properties for rent while we are continuing to have people returned to the State for work and there is many returning travelers that will rent for a while. I know once borders open up, we are going to have many people flocking to our relative safety that will rent before they buy as well.
So, the only thing that is going to alleviate the Rental Market is more investors coming in which they are starting to. Thank heavens. So, they will be buying rental properties to put on the market and add to that supply. And as tenants become fed up with the increasing rental prices over the coming six months, I think they are going to be increasing by as much as twenty to thirty percent. That will be prompting many of them that can, to get out and buy their homes, and with interest rates as low as they are, people are going to very quickly realize that homeownership is very attractive.
And that combination of investors purchasing in our market and tenants getting into the homeownership side is going to see our second wave of activity. It will be coming over the next six to twelve months. So, the first wave of activities very much been towards the land and building grants as well as the premium areas. The second wave is going to be driven by the tenants and the investors.
Number For Rent
So, enough talk. Let us get into some more stats. You can see that we have only got sixteen properties for rent at the moment. We usually have thirty to forty. So, very tight on our side. We have only got a few more available because we have got quite a lot of new clients joining us. And there are many people frustrated with their property manager out there that continuing to seek us out for the peace of mind that we can give.
A little side note, we are guaranteeing new clients that are coming to us at the moment, their rental payments. So, we are doing that until the end of March and that is because the majority of landlord insurers are still not offering landlord insurance that covers loss of rent.
So, we are providing that loss of rent coverage if you will– for our new clients that join us at the moment. So, a pretty crazy offer that I have come up with but it is only because we are managing things so tightly and that certainly will not excuse your tenant from paying rent and we will do everything possible to follow up with them, but I will cover it in the meantime if they happen to fall behind.
Rental Vacancy Rate
So, Rental Vacancy Rate now, this is the most telling sign. We were dropping from our massive 7.6% back in October of 2017. We are now at 1%. So, anything under three percent puts pressure on prices, at one percent they are going up and they are going through the roof. So, hang on!
Average Rental Price
On the average rent side. We have already seen an increase of eight percent show up since twelve months ago. So, we are now at three hundred ninety per week when we were at three hundred fifty and we have got a lot more to go. So, we were up as high as four hundred eighty. I think we are going to regain this over the next 12 months. And if not push ahead above that and before coming and correcting as more tenants do start to get out, more investors do start to buy. So, that is what I think is ahead.
Houses Property Clock
Now, Property Clock Timing. So, this became official, a month or two ago. Nearly was going to release a market update just to tell everyone about it. It was so significant that Perth had been labeled as starting of recovery. I was expecting it to have happened and it did. And you can see that Sydney and Melbourne are around and declining market most notably Darwin who is usually in sync with us, is around in their the start of recovery and Brisbane has I think it was previously around in a rising market as dropped back a bit.
Units Property Clocks
On the unit side, Perth still sitting in a declining market for units, and I would agree with that. Along with Sydney and Melbourne’s unit markets. Theirs is in a declining market too.
So, the factors affecting our market and what has changed since three months ago worth mentioning…
Rates have not changed since then, but we are expecting a further drop in November or at least before the end of the year. How much further is there to drop while we are at 0.25 cash rate now? They might think we are expecting a 0.20 drop. Banks may not pass any of it on, they might pass a little bit of it on. The main reason that the RBA is dropping that, is to affect bond yields from what I can understand and make it cheaper for the government to finance all of the stimulus that it is borrowing for. So, it is more about a government’s financing than it is about stimulating individual borrowings.
The banks are still fighting hard to keep customers. Just you know, you should be under three percent in your loan interest and you can fix now in many cases for low two percent. Again, whether you should or should not needs to be strongly considered. I cannot advise that area but speak to your Finance Broker or Financial Planner about that. Obviously, depends on whether you planning to stay put and you cannot park money in your offset account and save interest if you do move across to fixed rates. So, there are a couple variables in that to consider.
Lending assessment criteria most notably is changing to make borrowing more easier again. So, this is very significant for investors and homeowners, that borrowing going to become a lot easier. Not sure exactly what date the changes applied. But it is going to be affecting borrowers.
And I attended a Macquarie briefing for private wealth clients during the week which was fascinating and I made lots and lots of notes but the summary of where they saw things headed with Finance was five years of low-interest rates. The RBA has also come out and said that this specifically that there will be low-interest for a long while that should give homeowners and investors’ confidence in borrowing and also give you a bit of time for any property purchase, for instance, to work its way up increasing rental return and give you some breathing room at the moment. Where as a property would otherwise be negatively-geared. It is likely to be neutral to positive for the next while.
So, building approvals to June, now, all the grant approvals have not shown up for us yet. So, I am not going to go too much into this. They will start showing up in the coming months.
Employment, this is worth keeping track on because you see a lot of positive things coming out for WA but really when we look at how we measure up compared to the rest of the States down the bottom here. We are at 8.3 percent which is one of the worst unemployment rates and that is to July. So, obviously, it is tracking behind where the actual market is. That you can see that you know places like Tasmania, places like Victoria, are actually doing better than us for unemployment levels. New South Wales is also. So, we are one of the worse and hardest hit.
And it is very much a case of outer areas and certain sectors of the economy being hit harder than others. So, there is a lot of people that I speak to that are having their absolute best years in business and doing exceptionally well in their jobs, and so, they are the people that are driving our market at the moment and my heart goes out to anyone that is still affected. Because when you see these stats in these numbers, it really does remind you that there is a lot of people that still are pretty uncertain about their worlds and still without employment.
Macquarie has said it is likely to take a few years to get back to the levels that we were. And I also noted that they only saw growth ahead for the next twelve to eighteen months and they were expecting eight to ten percent Capital Growth for property prices. And this is just me quoting some of the things that I remember so, be careful with my second hand. But what I took from the briefing, mostly was that they were very optimistic of the road ahead regardless of what might happen. Whether that be a second wave (of COVID) or election outcomes in the US or a slow down in China. So, they thought we were going to be very resilient with the amount of stimulus that has been pumped in and is continuing to be thrown at this.
So, Policy Changes, and I started to touch on a few of those. The budget was released over the last month and saw the tax cuts for individuals passed on which will likely be spending back into the economy soon. So, that we will help the turnover and get that spending going. Majority of the focus for the budget was on stimulating business. So, stimulating the asset purchases with instant asset write-offs, and stimulating job hires, which certainly helps to give employers confidence in this time to go ahead with those hires that might otherwise be more difficult to make.
So that is the main things that I took from it and we might not be seeing too much individually, but it is great they are putting the focus and attention on businesses getting back on track because it is going to certainly help our property and share markets as well as anyone without a job. So, so far, the stimulus is reported to be around three times what was spent across the whole of the GFC, which is absolutely phenomenal considering we are not yet through this Covid period.
And it was notable from my Macquarie briefing that China’s recovery because they went into being affected by the virus first, their recovery is happening first, and they are pulling the rest of the world up. With demand for resources coming back on. We are going to benefit most directly from China’s recovery. Helping us come out of our slump.
It was also noted that the outcome in the US elections does not seem to be of any great consequence with regard to the economic outlook and under either president. There is going to be lots of stimulus continuing regardless.
Now, a bit of a contentious one, the impact of the COVID-19 Residential Tenancy Act changes has been extended until the 28th of March. We were very shocked that this happened considering only around one percent of tenants have been actually affected by Covid and experiencing hardship. The government, it is very disappointing to me and many of our clients that they have extended this blatantly.
What they should have done is focused on the help and support on those that are affected by hardship. Because by effectively, locking the market down, it is not helping the turnover of properties and I can understand their reasons. They are trying to keep stability for longer. But every time you artificially put controls on the market, it does not allow it to correct. And then you can actually have adverse effects with an even greater rental price increases coming by not allowing them to happen sooner than– so no rental increases has been the major one. We had over two hundred rental increases issued to occur on the 1st of October which all had to be retracted and now we are revisiting them to begin on the 29th of March. Typically seeing ten to fifteen percent increases so far.
By the time we roll around then and placed any new tenants by then, I will expect twenty to twenty-five percent increases. And so, it is also been very very difficult for landlords that have not been able to move back into their rental properties. So, they can go and claim hardship from a court and try to get access that way but very difficult process. And it is also been incredibly difficult on tenants trying to find a property to move out and very difficult on tenants that are new to the State.
So, that is not all because of the extension of the Covid-19 Act, but the rental market is very very difficult for everyone at the moment. We are just trying to go about having some understanding and helping where we can both sides, tenants and owners, get through when they have been affected and explaining what we
cannot do for the road ahead. So, very appreciative that not more of our tenants were affected and very grateful that they are doing so well.
Now, the Red Relief Grant has been extended and is still available if you experience a complete job loss. Check into that.
So, some tips to thrive and survive. This is more for those that have managed to put some savings together, have managed to be in a position to buy- with security around their jobs. It is a great time to look at upgrading or buying an investment property in well-located areas. Now, these are likely to be unaffected and will continue to increase in price, so I cannot see any downside in buying in these well-located and quality areas. Great time to do it.
Outer areas- I am starting to see some increases in our activity. So, if you have got property there, and if you have been wanting to sell, consider doing so now. And it all depends on what you are planning to do with the money and your reasons for selling. Your property should not be costing you money with interest rates as they are. Make sure that you have got the best rate possible.
If you are looking to reinvest some equity that you have got into a better-located area, that can be a very good reason to sell now. If you are looking to recoup some borrowing capacity or equity that you have gotten in a property for use in upgrading your house, that is a great reason to do it now.
But if you are looking to sell just because you are at your lowest point of emotions, what you need to understand is, when the market is at its bottom, that is when our emotions are also at the bottom. And I spend a lot of time each month just talking people out of selling if they do not have a strong reason to sell.
They have held on this long and you might feel very different about your property in two to three years time if it increases by thirty to fifty percent or more. So, try to ride those emotions out. Look at things logically. Does it make sense to sell? Do you need the borrowing capacity back? Do you need the equity back to doing things with? And if the opportunity cost of keeping that property is greater than what else your plans are, then look at selling it and getting the best price and I can certainly help you with sales all over Perth. That is what I specialize in.
And I am only too happy to give a free market appraisal and keep you updated so that you can choose your timing.
Now, My Crystal Ball rents will likely have twenty to thirty percent increase over the next twelve months. Before easing pressure when tenants move into newly built homes and want to get out of renting and more wanting to buy. There will be a lull in land and new home sales from now on.
And investors have started coming back to the market. We are hearing from our buyer’s agent, friends over East and helping many of their clients with finding tenants, which is very easy to do, still wanting to be highly selective and finding the quality tenants and maximizing the rent that we can get at that point.
So, what we are finding at every Home Opens is twenty to thirty people coming to Home Opens minimum. We usually getting five applications beforehand or more. With many tenants offering large amounts of rent in advance and over the asking price just to try to secure something. So, it is a seriously competitive rental market out there.
Established homes, in outer areas, are negatively impacted over the next six months with the Building Grants having taken a lot of the buyers out, but they will benefit from the increased investor and home buyer demand as we move around is this next phase.
So, I expect we will continue to see the price rises in the inner quality coastal and well-established areas that do not have land supply. And immigrants will start to be lining up at the border if you will. Trying to get into our relatively safe and robust economy. So, so many positives ahead and it is just nice to be coming to you without so many negatives to report for once. I am feeling a lot better about what the next six to twelve months holds. And I am sure along with you, I am going to be excited to get 2020 out of the way.
Hopefully, we can get back to doing some travel next year. Get back to some holidays. And hopefully, we can get back to some increases in sale prices for those that have held on for as long as I have. So, let me know if you need an update on the selling price for your place. We can help with rental, we are Specialist Property Managers all over Perth in two hundred suburbs. And I am happy to help whenever you need some property advice, get in touch.
Join my Property Investor Update here