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Perth’s property market gained strong momentum in the second half of 2020. As prices continue to rise, here’s why buyers have the western capital firmly on their agenda in 2021.
After emerging from several years of downturn in 2020, theproperty market is showing clear signs of recovery, with property prices continuing their upward trajectory as we enter the new year. As property experts and economists continue to predict big things for the western capital, here are five reasons you should be considering Perth for investment in 2021.
Despite recent rises in median price, Perth’s property market still offers relative affordability for buyers compared to other locations across Australia. The Housing Affordability Report (September quarter 2020) from the Real Estate Institute of Australia highlighted that Western Australia was once again the cheapest state across Australia to purchase property, with only 23.9% of family income needed to meet loan repayments - lower than the Australian average of 33.9% and well below New South Wales’ average of 42.3% and Victoria’s average of 35.6%. As the market continues to strengthen, this affordability offers strong growth prospects for buyers who enter before the upswing.
Perth’s property market has experienced sustained demand since mid-2020, and market indicators show this is likely to continue into the new year. First-home buyers make up a large percentage of entrants into the housing market, however, low interest rates and relative affordability have also seen owner-occupiers leverage conditions to trade-up and move into larger homes in Perth’s sought-after suburbs. With Perth remaining somewhat shielded from the global pandemic, a growing number of expats are looking to return to the western capital, bringing additional demand to the market. At the same time, investors are also starting to play a more active role as prices and consumer confidence strengthens – a trend expected to accelerate in 2021.
Strong rental yields
CoreLogic data for November showed gross rental yields were sitting at 4.3% for houses in Perth- well above the Sydney and Melbourne averages of 2.7% and 2.9% respectively. With rental supply at near-record lows and the lifting of WA’s temporary rental moratorium approaching in March, investors who enter the Perth market early in the upswing could be well placed to benefit from an uplift in rents and the strong rental yields on offer.
As conditions in the Perth market continue to strengthen, ANZ economists are forecasting growth of 12% for the WA housing market heading into 2021, underpinned by low levels of sales stock and strong demand from buyers. These predictions have Perth leading the nation in price growth next year - Sydney and Melbourne are predicted to lag, with forecast growth of 8.8% and 7.8% respectively.
Continued low supply of rental properties and the resulting competition amongst tenants is already putting upwards pressure on rents, with the Real Estate Institute of Western Australia forecasting 15% rental increases in 2021.
At the same time, Perth’s place in the property cycle provides lower downside risk than more expensive and potentially overheated markets which, combined withthese projections,makes the western capital an attractive prospect for both local and interstate investors in 2021.
Perth’s economy fared well during the COVID-19 pandemic. Thanks to a shortened period of lockdown and swift government intervention, many of the 89,000 jobs that were lost have since been recovered. With the economy largely driven by mining, the recent strengthening and increase of activity in this sector is helping to further boost economic and consumer confidence.
Backed by a strong economy, high demand and tight supply, Perth’s residential property market is set to offer unique opportunities for interstate and local investors in 2021. Buyers with the right property criteria are well-positioned to benefit from relative affordability, improving rental conditions and growth indicators,as well as strong rental yields and future capital growth.
Momentum Wealth is a multi-award-winning property investment consultancy based in Western Australia.
To speak to our team in more detail about where we are seeing opportunities across the market, or for more insights into these market indicators, please feel free to get in touch or request a consultation with our property experts.