The Real Estate Institute of WA has declared the state is in the midst of a ‘rental crisis’ with Perth’s residential vacancy rate dropping to 0.96% – its lowest in 13 years.
It is just the third time since 1980 that the rate has dipped below 1% in Perth.
REIWA president Damian Collins said if the vacancy rate continued on the current trajectory, it could eclipse the record low of 0.8% seen in March 2007.
“With rental listings in Perth falling 8% to 2926 over the month, we have certainly hit a rental crisis where tenants looking for a rental will potentially find themselves unable to find a home,” Mr Collins said.
“In addition, the reduced supply is putting upward pressure on rents with property managers on the ground finding increases in rent are occurring on new leases, as prospective tenants are in competition with each other to secure the limited supply.”
Mr Collins said typically investor activity would help boost stock levels, but low market confidence in the post-pandemic market had deterred investors.
“Western Australia has approximately 17% of properties purchased by investors, whereas we would normally expect to see investors buying 30% or more of the available properties,” he said.
“At the same time, we still have investors exiting the market, meaning the supply of rental properties is not sufficient to keep up with demand.”
Professor Steven Rowley, Director at the Australian Housing and Urban Research institute’s Curtin University research centre, said the lack of confidence was largely driving decisions by investors to defer new purchases or bow out of the market all together.
“We’ve seen prices in Perth fall for the last four or five years in most areas, so that doesn’t provide much confidence for new investors, and we’ve also seen very little movement on rents. So, it’s not been a particularly attractive market for investors,” Professor Rowley said.
“Rental housing hasn’t been able to keep up with population growth over past few years so we have a situation now where we have a very low vacancy rate.
“In a normal market that would push up rents and investors would come back into the market but of course, it’s not a normal market at the moment.
“We’ve also been under-building for quite some time. We’ve seen new dwelling supply drop off dramatically over the last five years so there’s certainly less dwellings coming onto the market as well.”
Professor Rowley said the moratorium on some evictions and rent increases did not provide confidence for the market. Would-be investors were likely to hold off on plans to purchase until the moratorium ends in March next year, he said.
“I do think that when we do get significant turn-around in prices and rents go up and there is growing confidence, investors will come back to the market. And of course, the borders don’t help when investors from the east coast or overseas are looking to buy.”
In September, the WA Government announced that the freeze on rent increases and evictions would stay in place for another six months until 28 March, 2021.
REIWA and local real estate agents have criticised the extension of the emergency period tenancy legislation for residential properties, saying it makes no economic sense and would lead to higher rental prices and a lack of rental properties.
Concerns have also been raised about the laws ignoring the needs of landlords.