Perth Property Management in 2021: End of Year Round-Up
What a year 2021 has been!
The impact of the COVID-19 pandemic on the Perth property market that started in 2020 continued into 2021. Nevertheless, house prices and rental returns increased throughout the year. At the same time, there were new guidelines and regulations that affected investors, first-time home buyers, landlords, and tenants.
As the year comes to an end, here is a round-up of what transpired in 2021 and what to expect in 2022.
Reflecting back on 2021
Perth’s property market began to grow rapidly in the second half of 2020 and this growth continued in 2021, making Perth Australia’s most promising property market.
A REIWA report shows that the number of houses sold or rented out increased steadily in 2021. The resulting competitive rental market has increased Perth’s average rents by 10-20%. Despite this increase, Perth still has the lowest rents of any city in Australia.
The COVID-19 pandemic initially and temporarily disrupted Perth real estate and forced property investors to postpone any property purchase.
As a result, Australia’s Federal Government created a stimulus package to slash interest rates. The low-interest rates are expected to remain in place until at least 2024. Consequently, investors and home buyers have had easy access to property financing in 2021.
Similarly, real estate investments increased in 2021 because investors were not afraid of fluctuating interest rates and enticed by record low rental vacancy rates
Stamp duty rebate extension for off-the-plan apartments and units
The Government extended the duty rebates for off-the-plan units and apartments in September 2021.
Investors can benefit from a 50% duty rebate, up to $50,000 if they buy certain apartments and housing units. Eligible property should be classified as a multi-tiered development, and be sold with a pre-construction contract.
The two-year extension means that property buyers will continue to enjoy duty rebates until October 2023. The government hopes that the off-the-plan duty program will encourage new home buyers to invest in residential apartments.
Tenants, homeowners, and investors will use the duty rebate extension to diversify property investments. Moreover, an influx of new investors to the WA market will correct the prevailing low rent rates.
For more information, read the full article about the stamp duty rebate extension for off-the-plan apartments and units.
Proposed guidelines affecting investment lending policies
The Australian Prudential Regulation Authority (APRA) is planning to modify its investment lending regulations. These proposed amendments will impact real estate investment financing.
APRA has the responsibility of advancing Australia’s financial stability by overseeing insurance and banking organisations. In 2021, the agency tried to alleviate the effects of the pandemic with new financial priorities. These priorities emphasise stress testing, resolution planning, and crisis preparedness.
APRA is concerned that the soaring property prices may overheat the real estate market. As a result, the agency can compel lending institutions to minimise or cease risky lending practices. APRA’s interventions may lower house prices and make houses affordable for first-time home buyers or entry level investors
APRA is also concerned by the escalating mortgage debt that may cross acceptable limits. Once again, APRA’s preferred intervention would be forcing banks to avoid risky lending. This is what the agency did in 2014 when it suppressed interest-only loans. Banks were ordered to hold increased liquidity and reevaluate their debt threshold formula.
Find out what the proposed APRA changes mean for WA property investors.
The Residential Tenancies (COVID-19 Response) Act 2020 (WA) ended
Initially, most landlords in WA were afraid that the economic slowdown would have serious consequences on the rental market. However, WA never experienced increasing vacancies in 2021.
Rather, Perth had the highest rental occupation in four decades. This occupation rate might have been higher if it were not for the limiting effects of the Residential Tenancies Act 2020.
The Residential Tenancies (COVID-19 Response) Act 2020 (WA) placed limitations on lease and rental terminations as well as the handling of unpaid rent. First, the Act directed landlords to defer rent payments from tenants who had lost their income due to the COVID-19 pandemic. The deferred payment program could be mutually crafted by the landlord and the tenant. Alternatively, the Mandatory Conciliation Service could step in and write the agreement.
The Act lapsed towards the end of March 2021, paving the way for ordinary tenancy regulations.
WA State Government Election 2021
Labour clinched a second term in the state elections that were conducted in early 2021. The landslide victory means that the WA government will proceed to fulfill landmark policy promises. One of the main promises is the decision to avail $100 million for investment projects in WA.
In the short term, the government is examining land tax amendments to make the WA property market more attractive to outside investors. Currently, property owners must pay taxes on all their pieces of land except their primary residence. The government can slash the land tax to reduce the cost of owning property in WA. Since the WA government reported a surplus of $1.2 billion in the 2020-2021 financial year, the reduction in revenue won’t have a devastating impact on the government’s budget though will have positive impact on property investor cashflow projections and market activity.
In the long term, Labour may introduce new legislation to stimulate investments in the real estate market. For instance, the Residential Tenancy Act could be amended to redefine the responsibilities and rights of tenants and landlords.
Find out more about what the WA election meant for Perth property investors.
Popular HERE Property Management Insights from 2021
Throughout 2021 we published several informative blog posts about property management.
These are the six most popular of those blog posts:
1) Should I convert my short stay rental accommodation to a long-term rental?
Many Western Australians are fond of short-term rental units, such as leased spare rooms, holiday homes, and granny flats. These properties are listed on online sites, mostly on Airbnb and Booking.com. The WA government introduced new legislation in 2021 that instructs short-term rental property owners to register with the state.
2) Everything you need to know about changing property managers
Property managers are supposed to interview potential tenants, advertise the property, and control the property’s expenses and revenue. The property manager will be deemed to be successful if they reduce expenses, increase the property’s value and revenue, and create a comfortable living environment for tenants. You may need to change your property manager if they fail to do regular inspections, are not trustworthy, and have poor communication, among other reasons.
3) The ultimate checklist for selecting the best property manager for your property
A qualified property manager increases a property’s value while maintaining high rental returns. As a real estate investor, you must find an experienced and skilled manager for your property. The right person must be proactive, understand your financial objectives, and be efficient.
4) 10 critical rules successful Perth real estate investors can’t afford to miss in 2021
The real estate market in Perth grew by an average of 12% in 2021. Property investors can follow 10 key rules when making medium and long-term investment decisions. Some of these rules include not speculating, being focused, choosing the right location, and knowing the socio-economic factors.
5) Is it better to sell a house or rent it out?
You can rent or sell your property depending on your financial and lifestyle circumstances. If you are an older person, you can rent it out because you may not be expecting to make long-term investments. Similarly, young couples may want to sell their house and use the funds to buy a bigger home.
6) What can you do if a tenant refuses to move out?
A tenant can become an emotional and financial burden to their landlord. You can ask the tenant to vacate your property, but the tenant may still refuse to leave. In this case, you can take several actions, including initiating an eviction process.
Looking forward to 2022
REIWA predicts that the prices of property in Perth will grow by 10 per cent in the new year. Nevertheless, these prices will still be lower than those in other Australian states.
The high sales volume that was reported in 2021 will hold in 2022. Sellers will try to list their houses while the prices are still high and interest rates remain low. Moreover, as borders reopen and interstate travel resumes, the demand for rental properties in WA will rise.
REIWA also expects several real estate projects to be completed in 2022. As a result, many of the people who are currently living in rented properties will move to their own homes. This will free up rental units, although the demand for rental housing will keep rising.
Finally, the WA State Government is evaluating the Residential Tenancies Act 1987.
The proposed changes may have a negative impact on investment because the amendments will curtail investors’ rights.
As always, we’ll keep you informed about all the changes that may affect you and your property investment portfolio.
HERE to help in 2022
If 2022 is the year you decide you need tailored and knowledgeable support from a property manager that knows how to accelerate your return on investment, then we need to talk.
HERE Property offers over 40 years of experience in the Perth market. Our expert team is 100% focused on simple, smart, and proactive property solutions.
To discuss how we can help you take a holistic approach to your property investments in 2022 and beyond, contact us today.