Conditions across the residential property market remain buoyant with a resurgence of price growth across sales and rental fronts, after falling by around 20 per cent over a 6 year period.
The Perth house median sale price as at March 2021 is 11 per cent higher than March 2020 (based on transactions settled to date).
Price growth has been driven by strong buyer demand outpacing supply. Sales activity across WA during the last year was around 44 per cent higher than a year ago, compared to new listings rising by a smaller 12 per cent during the same period (12 months to March 2021 vs 2020).
While new listings added to the market have risen, strong demand is keeping overall advertised stock levels low with 33 per cent fewer listings for sale in Perth as at the end of March 2021, compared to March 2020 (only 8,265 properties for sale across Perth in March 2021 vs 18,310 in October 2015).
Low listing levels have resulted in intensified competition amongst prospective buyers to secure the limited supply available. This is evidenced by median days to sell falling from 59 days in July 2019 to 28 days in March 2020 and 19 days in March 2021.
On the ground, it is normal to have multiple competing offers on properties within a few days from the first home open - not a good time to be a buyer, definatly a sellers market.
Data from the Australian Bureau of Statistics indicates first home buyers have been a core proponent of increased buyer activity with a 111 per cent increase in first home buyer finance approvals comparing the 3 months to February 2021 vs 2020. First home buyers contributed more than 40 per cent of all housing finance approvals during the period.
There is potential for house price growth to continue considering mostly first home buyers have been driving activity and trade-up or investors are yet return to the market in mass, sale prices are still below 2014 peaks, average incomes have risen by around $10,000 since 2014, and loan serviceability has dramatically improved on the back of low interest rates.
While there is more room for house prices to continue on a growth trajectory, it is likely to occur at a slower pace than seen over the last 6-9 months. CoreLogic’s home value index for Perth rose 0.8 per cent in April (much slower than the 1.8 per cent in March, 1.5 per cent in February, 1.6 per cent in January, 1.1 per cent in December, and 1.1 per cent in November).
The rental market is tight, with the vacancy rate persisting below 1 per cent for 7 consecutive months. For context, a vacancy rate of around 3 per cent is usually benchmarked as a balanced rental market.
Demand for rental properties has unsurprisingly fallen due to a combination of reduced migration flows and low interest rates creating opportunity for tenants to purchase their own home more affordably. Leasing activity fell 20 per cent over the year (12 months to March 2021 vs 2020).
Despite less demand for rental properties, a steeper decline in supply has created more competition amongst the fewer pool of prospective tenants seeking to secure the even fewer supply of rental options available. New listings for rent fell by 26 per cent over the year (12 months to March 2021 vs 2020). This has led to rent prices rising at their fastest pace since 2008.
Perth house median rents prices are $430 per week as at March 2021, 14 per cent higher than a year ago. Despite rent prices again increasing, Perth remains one of the most affordable major cities to rent in with rents still $30 below their 2014 peak. Despite rental costs remaining relatively more affordability than both historic levels and other cities, more tenants are likely to purchase their own homes if they have access to housing credit considering a median house rent would cost around $22,000 per year compared to median house loan repayments at 80% LVR costing $18,000 per year.
