Winter chill comes early to Perth’s rental market

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By Leith van Onselen

I noted a few months back how the ending of the once-in-a-century mining investment and commodity price booms appeared to have hit home in West Perth – home to the nation’s mining headquarters – with office rents falling dramatically and vacancy rates skyrocketing.

Now it appears that the residential rental market has followed suit, with rents falling and vacancies rising.

The latest data from SQM Research illustrates the situation.

First, rental vacancies have climbed materially over the past 18-months, although they remain relatively tight overall:

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More importantly, asking rents have tanked, sliding by 6.4% (houses) and 1.6% (units) over the past quarter and by a whopping 12.3% (houses) and 8.1% (units) over the year:

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Population growth has also begun to moderate in Western Australia (although it remains high overall), which should relieve pressure on Perth’s rental market:

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Western Australia was the prime beneficiary of the once-in-a-century mining boom, which saw business investment drive one-third of all spending in the economy in 2012. This also means that Perth’s housing market will likely bear the brunt of adjustment as the mining boom unwinds over the years ahead.

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Unconventional Economist


  1. Watch this space.
    Vacancies up + rents down – long term investors can take a bigger rental hit ( lower capital cost ) and will make sure their props. are occupied but those who came late to the party ( and a lot have ) are going to be in a lot of pain. – no rent & high repayments.
    Scramble for the exits starting in…….

    Ahhh schadenfreude with the morning coffee!

    • No way, the bigger the loss, the higher the NG tax break! Why would you even want your rental houses occupied?? 🙂

  2. Forrest GumpMEMBER

    Vacancies as reported by REIWA tell the story. (Although REIWA doesn’t have the full data set since not everyone lists their property with REIWA

    There has been a 31% increase in the number of vacancies since October last year.

    Here is the data from the REIWA website.

    Date Vacancies
    09/10/2014 3885
    12/12/2014 4622
    13/02/2014 5039
    13/03/2014 4912
    17/07/2014 5094

    If you are looking to renew your lease in Perth. Get a reduction or look elsewhere. There’s plenty around and cracks are appearing in the rentals. Price discounting is now taking place as desperate landlords seek to get their IP rented out after standing vacant for weeks (and in many cases, a month or more).

      • Forrest GumpMEMBER

        Just capture them every Thursday when REIWA update their website.

        The above is a snapshot of Monthly data, but I captured the weekly data since October last year.

        The weekly data since Oct basically shows the same thing. Vacancy rates are on the increase and are currently sitting at 30% above the October rate.

        As the construction wraps up on all the mine site expansion projects and moreover on Gorgon, we will see another 20+% rise as all the interstate immigrants return to their respective nests.

      • Forrest GumpMEMBER

        Got it.

        Copy and paste ain’t what it use to be…

        Vacancies since October last year. Courtesy of REIWA web site published each Thursday.

        09/10/2013 3885
        17/11/2013 4210
        10/12/2013 4578
        15/01/2014 4980
        13/02/2014 5039
        10/04/2014 5059
        17/04/2014 5094

  3. It is good to see vacancy rates rising.

    Vacancy rates are still far too tight – they should be in the area of 4-5%.

    4-5% in Australia is about equivalent to 8-9% in the USA where a different measure is used and is considered normal.

    At that point, when supply is a better match with demand, we will get a much better idea of what a reasonable rent should be.

    Keep building Perth.

    • keep building – there is nothing better for an economy than capital missallocated (wasted) into empty homes.

      • You have been listening to Willy “the spare bedroom pursuer” too much.

        if there were so many vacant houses the vacancy rates across the country would not be at record lows and house prices would not be at record highs.

        Sure there are some properties that are being hygienically sealed for their owners protection, and there are plenty of folks with empty bedrooms or a holiday house down the coast but unless you have some simple effective plan to set those empty bedrooms free, they make NO difference to people trying to find low cost housing to buy or rent.

        Yes – a land tax that replaces stamp duty would help in improving the utilisation of land and housing but as we know a land tax is not going to appear overnight.

        And anyway – even if we did reach the promised land and find that having built houses to improve the vacancy rate, we implement policies to set the empty bedrooms free and find that we now have a few extra houses – big deal.

        The capital tied up in a few empty houses is a tiny fraction of the capital that is currently tied up in grossly over priced residential housing.

        A few empty houses is a much better state of affairs than what we have now where hundreds of thousands of people are being overcharged due to shortages of low cost housing to buy and rent.

      • more than 10% of all homes are already vacant, relatively equally distributed across the country (e.g. Perth 9.6%).

        High house prices have very little to do with vacancy (there is no correlation between vacancy and prices, some of the most expensive places in Australia have very highest vacancy e.g. Sunshine Coast 15%). It’s price speculation that mostly drives prices up. People are paying more because they expect to sell for even more.

        We could reduce home prices from supply side, but it will take a lot of new homes to change speculators’ mindsets. So we will need to spend billions of dollars on millions of new empty homes to reduce home prices.

        Instead we could reduce home prices from demand side, removing NG, introducing speculative tax (e.g. 90% CGT tax on all homes sold within 10 years or so), by increasing interest and reducing maximum LVR on second and third mortgages, by taxing homes not used as PPOR (e.g. 2% tax on all non PPOR homes including holiday homes) … This will free existing empty homes, reduce rents and lower prices.

        Not only that demand side actions will not missallocate billions of dollars, these actions will actually increase budget revenue and provide more money to built infrastructure and homes for people in need.

      • “…on millions of new empty homes to reduce home prices.”

        That is an exaggeration – and many of those ‘vacant houses’ are not where people want to live (holiday home towns are empty out of season for a reason) or would not be released to the market regardless of the ‘stick’ that is applied to encourage it.

        But I don’t have a problem with working on the demand side and the supply side at the same time.

        It is just that demand side policies run into lots of resistance and supply side policies require nothing more than allowing people to build houses where they want to live.

        Much easier politically and with the dullards we have in politics ‘easy’ has a lot going for it.

      • Superb comment there Pfh007.
        For years now I have been dealing with shortage-deniers like doctorX spouting the same nonsense over and over again. Where do they get it from I wonder?
        “Oh no 10% of houses are unoccupied!!!” This was so in 2007 and is still so in 2014. It is normal.
        “Granny has spare bedrooms!!!” Grannies always have spare bedrooms. Is it possible to use them to solve the shortage facing young people?
        [shortage-denier answer: silence]

        “Demand factors raise prices more than shortage!!!” Perhaps so, but are you more worried about poor people missing-out on housing, or more worried about a poor-little-rich-boy having to pay many more dollars for his mansion? [shortage-denier answer: silence]

        ‘But “we” are creating one extra house for each two extra people, we are overbuilding!!!’

        “I don’t see homeless people in my street, there cannot be a shortage!!!”

        “If there was a genuine shortage then Chris Joye would be sharing with Steve Keen!!!”

        “There cannot be a shortage, look here is one house for sale for $460,000 only 90 minutes from the CBD off-peak and only needing minor renovations to its burnt structure!!!”

        “There is no shortage. That is a myth!!!”

        “They said there was a shortage in Ireland, Spain and Nevada. Now they don’t!!!”

        “How can you prove there is a shorgage? that is subjective”

        “There is no shortage of housing, here is a development that has taken 12 weeks to sell”

        “There is no shortage, rents did not go up in the last 3 months”

        “If there was a shortage then rents would be rising strongly”

        “There is no shortage of housing rents are low when compared to prices.”

        “The landlord is subsidising the tenant.” (grrrrrrrrrr)

        “There is no shortage of housing, young people expect a Ferrari. Is there a shortage of Ferrari’s”

      • Claw,

        That is indeed a painful list that gets trundled out time and time again.

        How the deployers of those arguments, get past the simple fact we are living in an out of control IP owners paradise and yet the vacancy rates to rent an IP property are tighter than a fishes rear porthole, is surprising to say the least.

        For some I understand the motivation, they don’t like the Big Australia boosters and/or urban sprawl and thus are resistant to building more houses. Anything, that has a whiff of ‘unused bedroom’ they leap on with alacrity.

        Fair enough except that the ‘spare bedroom’ arguments are absurd unless you can actually do something about it (talk about mission impossible!) and until they win the population argument and the population does stop growing we need more houses as we have needed more houses for the last 30 plus years.

  4. Cant help but notice the change in rhetoric –
    Used to be ‘we’re gonna dive off the capex cliff in the second half of 2014’ to ‘as the mining boom unwinds over the years ahead’
    Or am I tripping?

    • I offered 580pw for a new place, agent counter offered with.. 565pw!! Interesting negotiating tactic. Cant wait for the renewal tactics.

    • We got renewed at the same rate in February. We first moved in to our place in Feb 2012 for $420/week and now we’re up to $425/week. So not a decrease but not exactly shooting upwards either.

    • innocent bystander

      starting renting April 2012, rent went up 2.5% each six months for the first year. Last twelve months, no mention of an increase. I am living in an area with historical low number of rental properties, high owner occupancy area.

  5. Diogenes the CynicMEMBER

    A property I looked, at decent house (4×2) in decent suburb was $2000 per week 4Q13, then January it was advertised for $1800 per week, now $1600 per week and still no takers. Silly by the landlord, they probably could have rented it at $1600-1700 per week back in 4Q13 but people would have moved now so that price is still not right.

    There are a few others in this category. It seems executive rental market is being drastically affected a combination of the execs leaving and companies are cutting back their rent allowance.

    Sales at the top end still good, I suspect that is really linked to share market performance rather than employment/population metrics.

  6. Darwin is shaping up to be a fabulous financial disaster.

    I’m seeing houses that were purchased 18 to 24 months ago back on the market for not much more than they were purchased for. The investors will not break even as the stamp duty and other expenses will push them into the red.

    Rents here are also subsiding slightly.

      • ……and pop!

        But we won’t see it really unravel until the next wet season. There are 800 apartments that were due to be finished in April/May. It looks like 300 have had the projects slip a little and they won’t be ready for a couple of months.

        Shame really, I’d like them to have hit the market at the same time.

  7. The implied gross rental yeild for houses (according to SQM) is now below 3% in Perth and lower than Melbourne!

    The Perth population growth headwind is probably only going to accelerate from here – I don’t think the fall in rents is over by any stretch.

    We are in a suburb 22kms from the Perth CBD and live in a reasonably new suburb (avg house probably around 5 years old I would guess). There are vacant lots everywhere (In the surrounding streets, I would guess the number at somewhere >25%). In the two years we have lived in the suburb, only in the last few months have I seen any development activity on these vacant blocks whatsoever – recently the odd build has started to kick off.

    Now the market gardens adjacent to where we live have been put up for sale as individual lots with 430sqm blocks being marketing for $380k.. a mind numbing $884 sqm!

    I certainly won’t shed a tear when the Perth housing ponzi collapses in on itself. Farcical is the only word I can come up with to describe it.

  8. Was down at the pub and this got into a conversation about property prices easing, and that it would being financially ruinous to him that if easy money wouldn’t come his way.

    Overhearing I laughed, and his face turned sour. he seemed aggravated. I told him he made the investment decision, and my laughter hasn’t been the cause of failing house prices.

    He said it wasn’t a laughing matter that he could be ruined. I said I wasn’t laughing at that, I was laughing at people being surprised that record highs could ever fall.

    He wanted to get physical.

    Footage caught him throwing the first punch, so legally I am safe, and I’ve proceeded in beating him a pulp and he ended up hospitalised.

    He has neither private health insurance nor income protection insurance, and I am gathering his financial ruin is now all but assured due to mounting bills and lack of cash flow.

    This, and other pleasant stories can be found widely throughout the Perth suburbs.

    • Neville Gearless

      Are you pulling our legs Rusty?? I thought you were a girl…
      As for RE, couldn’t happen to a better industry, glad I’m not there anymore.

      • Mining BoganMEMBER

        I’d believe it. Sandgropers are VERY defensive when it comes to property ‘investments’. Reckon I’ve been close to being glassed a few times.

        For them there is nothing else. Anyone who says otherwise is a heretic.

    • Strange, sex religion and politics used to start fights in pubs.

      Now it’s stocks, SMSF and property.

      However, rubbing someone’s face in their own stupidity is always going to do it.

      • Neville Gearless

        Nah, in the good old days, just a sideways glance would start a fight. Now it needs a discussion of IPs..

        ok, laughing at someone is a step further than the glance.

  9. Asking rents down 12.3% in a year IS significant. Finally rents fall somewhere. This indicates the shortage is finally easing in Perth.

    I would need to see rents much lower before I call the shortage over.