Perth Property Market Outlook 2022: What Landlords and Property Investors Can Expect
Confidence is on the up and up in the Perth property market in 2022. The stage is set for double-digit price growth, a tight rental market and a rebound in investment, industry experts claim.
There’s plenty of reason for landlords and property investors in WA to be optimistic.
Australia’s most affordable housing
In 2021, strong price growth was recorded in the WA property market. The Real Estate Institute of Western Australia (REIWA) predicts this growth will continue into 2022. The outlook is for a further 10 per cent increase in house prices in the year ahead, on the back of a price growth of approximately 14 per cent in 2021.
Although property price growth is enjoying a healthy uptick, Western Australia remains the most affordable state for housing in Australia. According to REIWA President Damian Collins, house prices in most WA regions are still below their 2014-2015 high points.
One of the world’s strongest economies
While the pandemic rocked economies all around the world, WA’s geographical location gave the state a certain level of protection. Core economic activity throughout WA has stayed relatively solid, and the state’s economy has been the most successful in the country. At a global level, WA has one of the best-performing economies in the world.
Employment is particularly robust in WA, with jobs currently above national levels. The state’s unemployment rate was just 3.4 per cent in December 2021 – the lowest in the country and the lowest in WA for 13 years. This is a remarkable accomplishment in the era of COVID-19.
The resilience of WA’s economy makes the state all the more attractive to people wanting to live and buy housing here. In turn, this is good news for Perth’s property market going forward.
The impact of interest rate rises
In an effort to curb inflation, the Reserve Bank of Australia is almost certain to raise interest rates either later this year or in 2023. How much interest rates will go up is not clear, but economists at Australia’s major banks expect rates to remain well below 1.25 per cent by year end.
Collins recently told ABC News: “We certainly don’t expect to see mortgages at 5 or 6 per cent … and I don’t expect we’re likely to see an increase until, at best case later in 2022, but it’s more likely to be in 2023.”
According to Collins, hikes in interest rates may lead to a slower pace of price growth, but he is not expecting housing prices to start moving backwards.
CoreLogic Research Director Tim Lawless pointed out that an earlier than expected lift in the cash rate would imply a rapidly recovering economy – which would be welcome news. The downside is that a higher cash rate would have a cooling effect on activity in the housing market.
The overall expectation is that higher interest rates won’t cause WA’s real estate market to go completely off the rails. The state’s economy will most likely remain healthy, and WA will continue to be home to some of the nation’s most affordable residential properties. The low supply of housing in both the rental and sales market will contribute to another solid year of growth.
Perth’s rental shortage may ease slightly
2022 is likely to see a modest improvement in the supply of rental properties in Perth due to two main factors: the completion of new constructions and a boost in investor activity.
As new constructions enter the market, the number of rental listings is likely to rise. People will be moving into their new homes, leaving their current housing available for other renters.
In 2021, there was an increase in investor finance levels in WA. This is likely to continue in 2022, with investors seeking to diversify their portfolios and get in on a property market with excellent potential for growth. Over time, greater investment activity could help ease Perth’s shortage of rental properties.
Yet, in spite of an overall increase in availability, rental listings in 2022 are unlikely to return to their historical averages. The rental market in WA will remain tight in 2022, with high demand for rental properties continuing and increased interstate tenant enquiry during 2022 to-date.
Perth rent prices expected to go up
2022 may well see median rent prices rise by 10 to 15 per cent, which will be a drawcard for investors.
REIWA says that despite the escalation in rent prices, the rental market in Perth remains affordable. Tenants across Western Australia enjoy the cheapest rental market conditions in the nation.
If you’re a landlord or property investor, now is a good time to get your rental property appraised by a property expert to ensure you’re getting the best return on your investment.
The reopening of WA’s borders
Western Australia’s border closures have been stricter than elsewhere around the country, and this has potentially curbed activity in the real estate market. All eyes are on what happens next as the state reopens its borders – not just to domestic arrivals but also to international migrants.
The mood in the property market is upbeat, with expectations that open borders will spur home buyers and sellers into action. In Victoria and New South Wales, an easing of border restrictions was accompanied by a significant rise in the number of people wanting to sell their properties. This trend may be experienced in WA, though likely on a less dramatic scale.
Another expectation is that a reopening of the borders will result in an influx of migrants from interstate and overseas, whether in search of a better lifestyle or better job prospects.
With more people entering the state, the already tight rental for sale markets could be squeezed even further.
Impact of the Federal Budget 2022
The Real Estate Institute of Australia (REIA), the national professional body for Australia’s real estate sector, is urging the government to address jobs and homes in its Federal Budget for 2022.
Hayden Groves, REIA President, stated that the REIA has submitted three key recommendations for the 2022 election year budget: tackle the supply problems in the property sector, provide greater assistance to first home buyers and support the creation of jobs in the property industry.
While housing in WA is the most affordable in the country, if supply is not addressed, affordability will decline, as is the case in the nation’s other capital cities. In some areas in Australia, the number of available properties for sale is down by 40 per cent from pre-COVID levels.
Nationally, there was a rise in median house prices in 2021 for the eight capital cities, as well as a rise in the percentage of income needed to meet loan repayments.
The rental market is also suffering from supply issues where vacancy rates are hitting record lows and rent prices continue to climb. “Those needing to rent properties are struggling to secure a lease,” Groves stated.
A comprehensive national plan to improve supply would help renters and buyers.
Provide more assistance to first home buyers
The REIA’s recommendations include:
- Expanding the First Home Super Saver Scheme (FHSSS)
- Expanding the First Home Loan Deposit Scheme (FHLDS)
- Making interest rates tax deductible for first home buyers
Groves also said there is a need to help Australians entering the marketplace for the first time.
Support the creation of jobs in property
As well as a lack of property supply, there’s also a shortage of skilled staff in the real estate sector. With housing and property playing such an important role in the Australian economy, the REIA is calling on the Federal Government to support the creation of more jobs in the industry.
Why getting a regular rental appraisal is important
In Perth’s changing property market, determining the right level of rent to charge can be complicated. In order to attract and retain quality tenants, you need to strike a balance between optimising income from your property and giving renters a fair deal that’s consistent with market conditions.
Finding the right price point for rental properties is not getting any easier in the WA capital, where the real estate market continues to develop and grow. Getting a rental appraisal from a property expert is an excellent strategy for landlords and property investors.
In carrying out a rental appraisal, a real estate professional will analyse your property, your target market and your location to calculate how much rent you should be charging and specific lease terms to compliment positive rental outcomes. You will receive a detailed report of your rental appraisal, which you can then use to create a successful rental plan.
While 2022 is an ideal time to get a rental appraisal, property investors should have their rental housing appraised on a regular basis to ensure alignment with the ups and downs in the market.
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