The Perth property market has seen further signs of life on the road to recovery this year—including a lower vacancy rate and the growing demand for higher-density living.
The Western Australian capital’s vacancy rate has dropped to 5.3%, the lowest since July 2015, according to the Real Estate Institute of Western Australia (REIWA).
Hayden Groves, president of REIWA, said Perth’s vacancy rate for January 2018 had improved significantly from last June.
“It’s quite remarkable to see it this low considering seven months earlier Perth’s vacancy rate soared to 7.3 per cent – the highest we have ever experienced, and now it’s back at levels last seen in 2015,” Hayden said.
“The vacancy rate is a good indicator for how the entire rental market is tracking, with reiwa.com data for February showing stable rent prices and declining listing levels. Leasing activity did drop off in February; however, levels are still healthy and trending above long term averages.”
Groves said a number of factors contributed to the lower vacancy rate, including an uplift in population growth and a reduction in average tenure time.
“Population growth in WA has started to improve. Rental markets always feel the effects of population trends, with new entrants into the state the first to soak up rental stock.”
REIWA’s vacancy rate was computed using data obtained from a monthly survey of its members. The survey details how many rental properties members manage and how many of these are vacant.
“Tenants are also moving more frequently,” Groves said. “In 2014 for example, the average tenure time was 45 months, fast forward to 2017 and it’s now 34 months, which is almost a full year less. This has led to an increase in leasing activity which has driven demand for rentals and had a positive effect on the vacancy rate.
“Another contributing factor is the reduction in the number of new dwelling commencements across the Perth Metro area. This has played an important role in lowering the vacancy rate. With less new dwellings coming onto the market, existing rental stock is now being soaked up, which is why rental listings have declined 19 per cent over the last year.”
Baby boomers to drive demand for higher-density living
The demand for higher-density living in the WA capital is set to explode with the rising numbers of baby boomers reaching retirement and wanting to downsize, according to Shane Kempton, CEO of Professionals Real Estate Group.
Kempton said this trend had already begun, with the latest data from the Australian Bureau of Statistics (ABS) covering the final months of 2017 indicating that there were 2,854 higher-density homes, such as apartments, given building approval in Perth.
“This represented 32% or nearly one third of the total number of homes given building approvals in Perth over this six-month period,” he said.
“Traditionally, the Perth real estate market has been dominated by larger family-style homes, but this is now rapidly changed due to our ageing population and the fact that more people are living alone.
“ABS predictions indicated that 23% of all Western Australians will be aged 60 years and over by the end of 2021 compared with just 15% in 2001. This population shift will have major implications for the Perth real estate market, and in particular, result in a growing demand for higher-density homes.”