Low prices, high rental returns and a strong economy are increasingly attracting east coast investors to Perth, according to two West Australian brokers and a buyer’s agent, leaving some FOMO-driven investors to overpay.
But while the lucrative WA market may be driving fear-driven investor decisions, questions remain over who is actually missing out.
“With the number of expats moving home or wanting to invest back in Australia in recent years we’ve certainly noticed more interest in Perth soil, especially from interstate,” said Helen Avis (pictured above centre), director of finance of Specialist Mortgage.
Part of the SMATS Group, the WA brokerage won the prestigious Finance Broker Business Award category at the recent MFAA WA Excellence Awards.
“To put it plainly, $1 million on the west coast can get you a large home in a good neighbourhood whereas that same budget in an overly competitive market on the east is getting you a unit, an aged apartment or a home on the urban fringes,” Avis said.
“That level of affordability coupled with the strength of the underlying state economy is attracting investors looking for both yield and growth.”
Robert Flynn (pictured above right), director and mortgage consultant at WA-based Vorteil Financial Group, said the lack of supply was driving the fear in the market.
“When you’re in WA, it’s quite obvious that there is just such a chokehold on supply, and being so isolated, I think we’re a little more affected,” said Flynn, who also won the Young Professional Award at the recent MFAA WA Excellence Awards.
“While everyone’s been impacted by COVID and Ukraine war and whatever else in terms of supply chain, there are just so few new builds, whether that’s single-res or multi-res properties, that are actually getting off the ground or being completed in a timely manner.”
Who is really missing out?
Peter Gavalas (pictured above left), a buyer’s agent from Resolve Property Solutions, said Perth’s property market is in an investment sweet spot right now, with a vacancy rate of just 0.6% in May, according to SQM Research.
Gavalas said this limited availability is causing asking rents to soar, with annual growth of 18.9% for the week ending 12 June.
Consequently, CoreLogic data showed Perth’s gross rental yields are among the highest in the country, at 4.9% in May.
“Perth stands out as the only capital city where dwelling values have returned to record highs after the recent downturn. Despite this, Perth remains one of the most affordable cities in Australia with a median value of $580,000 in May, according to CoreLogic,” he said.
However, low stock levels are posing a significant challenge for homebuyers – with the number of properties available for sale in Perth falling to a 13-year low at the end of May, according to the Real Estate Institute of Western Australia.
The scarcity of listings has resulted in homes selling at a median time of just 12 days, the fastest median time on the market since REIWA’s records began in 1998.
Avis said that while there was probably an element of fear among investors, they were the least likely to be “missing out” on Perth property.
“They can stretch their dollar further by investing in Perth properties and distinguished and experienced investors are certainly seeing the Perth market as one to be plucked,” she said.
Flynn agreed, saying that when it came to investors, they were more likely to take a commercial view compared to others in the market.
Flynn said that he was seeing three drivers in the current market – out-of-state investors, people looking to move to Perth, and those that already live there.
“For the investors it’s quite transactional. It comes down to the numbers and they set a ceiling and stop. Others are moving for lifestyle reasons as well from places like Sydney and Melbourne where the market price is higher and they’ve generally got more room to move,” he said.
“But for the people that are here in WA, they need a property not as an investment but as a place to live in their community. This is why I think the true FOMO right now is coming from within WA.”
Is there opportunity for brokers?
While the market is competitive, Avis said with many homebuyers rolling off low fixed-rate mortgages within the next six months, brokers could provide value right now.
“There is still plenty of renegotiation and refinancing opportunities out there, especially when a greater portion of the population are heading into mortgage stress and are really starting to feel the bite of increased costs of living expenses,” Avis said.
“Continuous client support is key to retaining clients in the current environment. Check in with clients regularly to see if their circumstances have changed.”
Flynn agreed, saying there was a “huge opportunity” for brokers in this market – not only to be a trusted adviser domestically but also among buyers’ agents.
“Buyers’ agents are looking for someone to be able to deal with brokers who know the Perth market and they are obviously looking to buy in the area so there’s definitely opportunity there,” he said.
