Perth Rental Market

This week sales continued to trend downwards with a 5% drop to 747. House sales fell by 5% and vacant land fell by 16% but the surprise was a 19% increase in unit sales. The graph below shows sales figures continuing back towards our average over the last 12 months (red line) of 613.

Listings over the last two weeks have reversed their downward trend and this week increased by 2% to 10,657. It would be surprising if listings continue their downward trend too much further because as we have written before, Michael Keil with over 30 years of real estate experience believes 12,000 listings is an approximate equilibrium between buyers and sellers. So without some kind of shock like a large wave of migration, overseas and/or interstate, increased investor buying activity like we saw around 2012-13 or increased Government stimulus, there is no reason for listings to continually decrease.

Rental listings on the other hand have continued their downward trend decreasing by 4% to 3717. The under-supply of rental listings is the reason why Perth has not experienced a decline in rents over the past 3 months. Eliza Owen, Corelogic principal, agrees with our previous conclusions that owner-occupiers have been replacing investors in the property market here for some time.

Ms Owen said, “Perth’s rising rental values were largely a reflection tightening market due to years of weak investor activity,”

Other capital cities that have experienced high investor activity are now facing decreased rents due to the coronavirus impacts on overseas migration and the loss of jobs and income. Corelogic released their quarterly change to rent prices across the capital and the bar chart below shows just how well Perth’s rental market is performing.

The stability of Perth’s rental market has led REIWA President Damian Collins to lobby the WA State Government to not extend the 6-month emergency period tenancy legislation that expires on the 30^th of September this year. The legislation basically made it illegal for a landlord to evict a tenant if they are experiencing hardship due to coronavirus.

However, only 1% of tenants during the emergency period were unable to meet their rental payments leading Mr. Collins to say,

“The emergency legislation was introduced on the basis that the WA economy would face a far greater shock than it actually did and while we understand that the economy is certainly not as strong as it was pre-COVID, applying emergency legislation to all tenancies is not the appropriate response to those who may need assistance.”

Finally the Federal Government released a special fiscal budget update last week showing the biggest deficit since WW2. The deficit for 2019-20 is forecast to be $85.5 billion but we will know the exact amount on 6^th of October. At the start of the year the forecast was for a $5 billion surplus for 2019-20. The forecast for 2020-21 is an “eye watering” $184.5 billion with the Governments total coronavirus spending at $289 billion which totals 14.6% of GDP. Furthermore our total Government net debt is forecast to be $677.1 billion by 30^th June 2021.

To be realistic, the Federal Government didn’t have any other real options because if employment was not supported the total cost to our economy would have been far greater than the deficit incurred over 2019-20 and 2020-21 financial years.

Reproduced with permission from:
Ryan Brierty,
in house economist from Michael Keil @ michaelkeil.com