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Momentum Wealth Managing Director and President of the Real Estate Institute of Western Australia, Damian Collins,shares his predictions for Perth over the next 12-months.
Tipped to outperform the nation in 2021, many experts are predicting ’s property market to experience strong growth over the next few years. As Momentum Wealth’s Managing Director, REIWA President and a doyen within the industry, Damian Collins is in a better position than most to predict what the future holds.
Here are his predictions for the year ahead.
Median prices will rise
Led by record-low interest rates and market affordability, buyers have flooded into the Perth market to capitalise on this cheap cost of borrowing money. The Perth market is also experiencing an increase in the number of residents returning home from interstate or overseas thanks to the state’s relative freedom from COVID-19. Faced with an already diminished pool of stock on the market, Mr Collins says this surge in buyer activity is helping place upwards pressure on property prices.
“We have seen a marked increase in buyer activity, especially during December which is usually a quiet time for the industry, and this highlights the number of buyers who are active and looking to take advantage of market conditions,” Mr Collins said.
Despite house prices remaining steady during December, Real Estate Institute of WA (REIWA) data highlights that 45% of suburbs experienced an increase in median price, and Mr Collins thinks other suburbs will soon follow.
“Property listings for sale decreased 16.5% in December and due to this sustained pressure, we expect to see prices grow 6-10% by the end of 2021.”
Driven by a lack of stock and heightened demand, Perth’s rental vacancy rate has sat below one percent for the past five months, and the median rental price is beginning to rise thanks to this perfect storm of contributing factors. Data from SQM Research shows vacancy rates during December were 3.6% and 4.7% for Sydney and Melbourne respectively, this is in contrast to Perth where open homes are attracting record numbers of applications as tenants pay above asking price to secure properties.
Emergency legislation brought in at the onset of the COVID-19 pandemic is set to end in late March and this looks likely to trigger a further increase in rental prices, with many outlets predicting increases of 20% over the course of 2021.
“The removal of the rental moratorium should give investors the confidence they need to re-enter the market as it provides certainty, incentivises investment and gives opportunity to capture improving conditions.”
“Despite rents being predicted to increase, it is important to note that Perth is still one of the cheapest cities to rent in and our median rental price is well below what it was during the mining boom.”
Investors set to re-enter the market
A unique combination of affordability, strong rental demand and high yields looks set to entice investors back into the Perth property market. After several years of low investor activity, especially amongst interstate investors, buyers who enter the Perth market are well positioned to benefit from forecast growth.
Offering greater affordability than Australia’s other major property markets, property prices in Perth are a drawcard for investors, especially those that have benefitted from the recent growth of eastern states markets, and heightened rental demand is leading to attractive yields on Perth rental properties.
CoreLogic data from November highlighted the strong rental yields on offer in Perth with gross rental yields sitting at 4.3%, well above the 2.7% and 2.9% yields available in Sydney and Melbourne.
Mr Collins notes that while conditions in Perth are favourable for investors, they should look to act soon to avoid missing out on a property before prices rise.
“A rise in median house prices is inevitable and I’d encourage all investors who are thinking of purchasing in Perth to act quickly before this window of opportunity closes.”
“Properties are moving incredibly quickly but buyers with a strong understanding of the local market and the right buying criteria can still find investment-worthy assets,” Mr Collins said.
Sections of the market will outperform the rest
Despite the predictions that Perth’s median price is expected to rise by up to 10%, Mr Collins said not all sections of the market will experience consistent growth.
Suburbs with strong demand drivers, such as those near school zones or nearby key amenities, tend to be better positioned for longer-term growth. It is also an important consideration to buy property types that have a history of performing in that location. Buyers need to ensure there is demand for the property type they are buying within their target area.
Mr Collins expects suburbs within a 15km ring of the Perth CBD to outperform the market thanks to a combination of location, amenity, and housing composition.
Mr Collins warned against buying on the outskirts of Perth’s suburban fringe, citing the risks of oversupply that these housing estates can pose.
“Outer-lying suburbs may offer cheaper housing options, but these properties will suffer from lower capital growth due to the abundance of land in these areas which can create an over-supply of stock.”
“The Perth market is heating up and we do expect strong growth, however, it is still possible for investors to make poor property decisions. It is important for prospective buyers to undertake market research to help set themselves up for the greatest chance of success.”
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 Perth market, or for more insights into these market indicators, get in touch or request a consultation with our property experts.