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Will we see growth in the rental market this year?

Wednesday, 5th Feb 2014

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After a lacklustre year, what can we expect for the Perth rental market in 2014?

As far as landlords are concerned, 2013 marked a year of solid capital growth but a year of flat to declining rental returns. So what can we expect for the Perth rental market in 2014?

Let’s look at the major factors at play. Although the population is still growing at an impressive pace, growth has started to slow, putting less pressure on the rental market. Demand is also being affected by the fact that many renters have recently become home owners, reducing the pool of potential tenants. Plus, the situation has been further compounded by an increase in investor activity, which has created more supply.

The vacancy rate now sits at above 3% and while this figure is representative of what many would consider a balanced market, it certainly highlights how things have changed. Go back to the end of 2012 and the vacancy rate was 1.9% and rents were growing at around 15%.

There are simply more properties now available for rent, and for this reason, opportunity for rental price growth will be limited until the situation changes.

Some areas, which are still undersupplied, will record growth in rents, but areas that are oversupplied will suffer, particularly those with a high concentration of investor-owned apartments.

With supply catching up to demand, landlords should think carefully about increasing the rent in the current market and avoid taking unnecessary risks.