What can we expect from Perth’s residential property market in 2020?
Perth’s residential property market faced one of its most eventful years yet in 2019. While market conditions remained mixed, investors nevertheless walked away from the year with a number of wins, including a renewed sense of certainty following the Federal Election, record low interest rates and continued improvements in rental conditions. With the new year underway, we wanted to reflect on some of the key property market trends we saw throughout 2019, and how this could impact WA’s residential housing sector in 2020.
While varying across different segments of the market, overall rental conditions continued to show signs of improvement in 2019, in many ways building on the initial trends recorded towards the end of the year prior.
Throughout the year, we saw a sustained rise in leasing activity, a significant decline in listings for rent (below 6000 in mid-December according to REIWA figures), and a continued downward trend in rental vacancy rates, which reached a low of 2.4% in December 2019. While median rents continued to hold steady at $350 per week, evidence on the ground indicated a rise in rental competition in the latter half of the year, underpinned by greater attendance at home opens and more enquiries on well-placed properties.
Momentum Wealth’s research analysts predict that this trend is likely to develop further in 2020 as rental stock continues to tighten, with the ensuing rise in rental competition in turn placing upwards pressure on overall rental prices.
Following subdued activity in the lead up to the Federal Election, sales transactions in Perth’s residential property market saw notable improvements in the second half of 2019, averaging at 650 sales per week in November 2019 compared to 479 per week in May five months prior.
Mirroring the trend in rental listings, stock for sale experienced a significant decline over the year, dropping from over 17,000 properties for sale in March to around 13,700 in mid-December as existing stock was absorbed, supported in turn by a rise in sales transactions in the second half of the year.
At the same time, figures from CoreLogic in late 2019 also showed a decline in the number of new listings for sale, which were at their lowest on record in November 2019.
Our research analysts continue to advise that whilst some areas of the market such as Perth’s upper-price segment have already been recording higher levels of buyer demand, a further tightening of stock, exacerbated by the low levels of new supply coming on stream, could see higher levels of buyer competition in some market segments in 2020. However, asset selection remains critical for investors, who should be cautious of buying in areas where there is still significant supply to be absorbed.
The North-West was another area of WA’s property market that enjoyed improved performance across 2019. Increased activity brought about by the influx of new mining investments saw growth in a number of key areas within the Pilbara across the year, with Karratha recording 11% growth in property prices in the year to September 2019. Strengthening rental returns, combined with the drop in house prices that followed the mining boom, saw yields exceed 8% in some areas, in turn presenting an attractive yield-play option for investors.
With supply in the North-west expected to continue tightening due to both the absorption of existing stock and lack of new supply coming on stream, our research analysts say the North-West market remains a key area to watch in 2020, but timing entry and exit into these markets will be crucial given the higher levels of volatility in regional areas.
Want to find out more about the trends set to impact Perth’s property market in 2020?
Register for our upcoming property seminar, featuring leading market insights from Momentum Wealth’s Managing Director and REIWA President, Damian Collins.