Figures from the Real Estate Institute of WA shows Perth’s median rent continues its downward trend dropping a further 2.3 per cent in June quarter to $420 per week. This downward trajectory in residential rents that began around 18 months ago and is likely to continue as supply of (particularly apartments) rental accommodation continues to increase. At last count, about 8,500 rental properties were available for lease metro wide up 30 per cent on the March quarter.
This rapid increase in supply can be directly attributed to the end of the mining investment boom which has lead to fewer jobs meaning population growth in WA has slowed to its lowest level in eight years.
Of the central metropolitan areas, Fremantle have been the worst hit in the June quarter with 21 per cent fewer property leases signed in Fremantle compared to twelve months ago. Fremantle’s median rent is $495 per week, down by 3 per cent on last year although the real story here is supply with 30 per cent more rentals listed giving tenants plenty of choice Fremantle’s available rental stock has grown by 5 per cent in a quarter with an average 41 days needed to find a tenant.
Across the metro area, the vacancy rate sits above 5.0 per cent but is beginning to level out after a steep climb from its low of 1.8 per cent a little over two years ago. The rapid change in the rental market has caught many by surprise especially Landlords who are usually reluctant to agree to a tenant’s request for a mere $20 a week rent reduction. However, given the rapid rise in rents from 2009 through to 2013 (by 80 per cent in some areas) a $20 per week reduction is a relatively insignificant 4.5 per cent. Landlords thinking they can renew rents with existing tenants at last years’ levels are, frankly, kidding themselves. Thankfully, interest rates on borrowings remain low mitigating any short term financial discomfort for Landlords.
With around 7000 new apartment dwellings due for completion over the next two years, supply of rental property will continue to dog rental values particularly those in the higher priced areas. Rents in more affordable metropolitan areas remain, in contrast, relatively stable with areas where rents are around the median of $420 per week experiencing stable returns for investors.
Like all real estate stories, this one is cyclic in nature. In September 2007, Fremantle’s median weekly rent was $333, it is now $495, a near 50 per cent increase. The chance of rents falling back by the same percentage amount over the next eight years is very slim indeed. Landlords are well advised to ride this bump in the market.
