April 17, 2014

Perth rents high despite vacancy rate easing

The latest rent increase is surprising given that the number of properties available for lease has increased.

Perth’s overall median rent increased to $470 per week during the March quarter, a rise of 4.4 per cent for the period and up by almost 12 per cent on the same time last year.

This breaks down to a median rent for a house of $480 and $450 per week for a unit.

The lift in asking rents during the March quarter was largely due to increases for flats, units, apartments and villas.

The latest increase is surprising given that the number of properties available for lease increased by more than 50 per cent in the six months leading up to March.

Equally surprising was the rise in properties for lease through the March quarter itself because this is traditionally a period of high demand that usually causes a seasonal dip in the vacancy rate.

REIWA analysis suggests that while there was some modest increase in demand for rentals during the March quarter it was offset by properties being freed-up by first home buyers leaving the rental system for a home of their own.

The inner-city zone within about 10kms of the CBD remains the dominant rental market as it includes about 85 per cent of all multi-residential property in the metropolitan area, of which half is rental property. This central sub-region saw a rise of $30 to a weekly median of $500.

While the outer regions experienced stronger demand for leases during the quarter, up by 19 per cent on December, it was the 9 per cent increase in leases in the inner city areas that were responsible for the overall uplift in metropolitan median rent. This was due specifically to the large rise in leases for strata dwellings following a dip in that sector during December.

The rental market is showing us that there is a flight to outer suburbs by many tenants looking for more affordable accommodation. This explains why in the south-east corridor through Gosnells there was a 27 per cent increase in demand during the quarter and that region’s median lifted by 6 per cent to $420 per week.

The jump in the overall median for the central region and inner city area was largely driven by the western suburbs, City of Perth, Fremantle, Bayswater, Bassendean and south- east parts of the City of Stirling such as Tuart Hill, Yokine, Mount Lawley and Dianella.

I caution against reading too much into the rent increase illustrated in several sub-markets, as much is caused by the types of homes being leased during this period and which may have skewed the March data.

We need to consider the rental data in context and the fact is the vacancy rate has eased off, lifting from 1.9 in December to around 2.3 per cent for the March quarter.

With the long-term equilibrium in Perth being a vacancy rate of 3 per cent, it seems things are trending towards normal despite some pockets of greater demand where competition is nudging up prices.

This article was originally posted on reiwa.com.

Image by Nick Findley via Flickr.


Sales Off Over Easter As Rental Vacancy Rate Stabilises

Not surprisingly, reported sales in this week’s Real Facts took a dive due to the Easter break, down 38% on the previous week. However this was nowhere near as severe as the fall we saw due to the Easter break in 2011 which coincided with Anzac Day when sales fell 57% and the market was heading into its winter hibernation. The extent of last year’s fall was very evident in last week’s 15 month weekly sales graphic. The fall in activity is also very evident in the Top Performing Suburbs, none of which reported double digit figures

Preliminary rental data has the vacancy rate for the March quarter sitting at 1.9% as the sharp monthly declines over the past 3 months has been arrested with the monthly figure for March currently sitting at 1.6%, the same as February. The stabilising of the vacancy is also evident with the properties available for lease rising 12% since early March after falling 28% in the first two months of 2012. The declining vacancy has seen the overall median rent rise to $420, up 10% for the year with the latest median house rent for March quarter now sitting at $425 whilst the multi-residential median rent has risen to $400.

In other news the latest Housing Finance data is out today indicated loan commitments fell 2.5% seasonally adjusted nationally whilst in WA they increased for the seventh month by 0.8%. All loan categories – construction (1,017, up 17%), newly erected (216, up 3%) and established (5,144 up 7%) increased in original terms in WA but refinancing which is part of the established loan figure also increased by 7% and still represents a very high 38% of all approvals and 47.5% or nearly half of all established approvals. First home buyer loan approvals fell 2.4% to 1,247 with the proportion of first home buyer loans excluding refinancing falling from a spike of 35.5% in January back to 31.7% in February.

Graphic of Perth Rent & Vacancy Rate


Understanding property market language

Property market jargon wordcloud

News commentary on the property market can sometimes seem a bit confusing. Jargon is often used but rarely explained. Most of it is fairly simple to follow once you take a moment to think about it and this column helps demystify some of the more common terms.

Median Price: The mid point for a range of property values that are ranked from the lowest to highest in price. For example, if there are five sales in a sample ranked from cheapest to most expensive, the median is sale number three. REIWA uses the median price as a better way to gauge a market, rather than using the average price which can be easily skewed by a large number of high or low sale prices.

Vacancy rate: The proportion of rental properties that are unoccupied. A high vacancy rate is better for tenants, giving them more choice. A low vacancy rate means things are tight and generally puts upward pressure on rents. The vacancy rate can be used to indicate if the overall supply of housing is meeting demand.

Capital growth: The increase in the value of a property. The capital gain is the difference between the purchase price and the selling price. It is used primarily for income tax calculations.

Investment return: The combination of capital growth and the net income derived from property ownership.

Gross rental yield: An equation used to compare rental returns. It’s calculated by dividing the annual rental return by the price of the property and then multiplying that result by 100. This can help you compare the rental yields from different properties with different values and rental returns. The rental yield tends to go down as the price of the properties rise. Investors are generally looking for higher gross rental yields.

Title: The ownership of a property, or document showing evidence of ownership. In WA the most common form in the residential market is known as ‘Green Title.’ This is usually a traditional bock of land not affected by owners of adjoining properties.

Strata Title: This is different to Green Title because it covers land that is shared by owners of adjoining strata titles. Shared land is known as common property. Strata title dwellings in Perth are most often places such as villas, units, apartments and townhouses which have a common driveway.

R-Codes: The name for the residential housing density codes, describing the average land area required for construction of a dwelling on a block of land. R-Codes are referred to by developers and local councils when considering redevelopments. To calculate the land areas which apply to each R-Code simply divide 10,000 by the R-Code. For example, the common R-20 zoning in Perth would require 500sqm of land for each dwelling.