Perth is facing an unprecedented shortage of properties for sale as listing numbers reach record lows.
This scarcity compounded by high demand fuelled by population growth, a tight rental market, and construction delays has made it increasingly challenging for homebuyers to find suitable options.
But in an ultra-competitive market, forming good relationships with buyer’s agents could be what sets one broker apart from another, according to Robert Flynn, director of Vorteil Financial Group (pictured above left).
“I was trained to solve as many problems for your clients as possible and they’ll love you, come back to you, and refer you,” said Flynn, who recently won the Young Professional Award at the 2023 MFAA WA State Excellence Awards.
“While I may not have the skills or qualifications to do everything myself, my role is to be a conduit for my client and connect them with people I trust to offer the best service they need.”
The perfect storm of conditions
The number of properties available for sale in Perth fell to 5,384 at the end of June, according to the Real Estate Institute of Western Australia (REIWA). That’s a 4.4% decrease from May and a significant 37.5% drop when compared to the same time last year.
Peter Gavalas (pictured above right), a buyer’s agent from Resolve Property Solutions, said while it was typical for new listings to decline during the winter months, the current situation in Perth was “unprecedented”.
“To put it into perspective, the last time listing levels were this low was 13 years ago in 2010,” Gavalas said. “But back then Perth had a much smaller population and fewer private dwellings.”
According to the census, in 2011, Greater Perth had a population of 1,728,867 residing in 726,004 private dwellings. A decade later, in 2021, the city’s population had grown to 2,116,647 with 882,374 private dwellings.
This means that listing numbers as a percentage of total properties have fallen from 0.0075% in 2011 to 0.0062% now.
“Taking it at face value, we currently have the same number of listings as in 2010. But when you crunch the numbers, it’s actually much lower in per-capita terms,” Gavalas said.
Western Australia’s population grew at a blistering pace of 2.3% over the 2022 calendar year, driven by strong overseas and interstate migration, according to the Australian Bureau of Statistics.
Due to Perth’s status as one of the most competitive capital cities for potential tenants in Australia, many of these migrants are choosing to buy rather than rent.
“With recent REIWA data showing homes in the city are being snapped up in a median of just 10 days, the fastest time on record, this increasingly competitive environment will likely keep pushing prices upwards for the foreseeable future,” Gavalas said.
The Warren Buffet effect
While properties being snapped up in record time, Flynn said the situation could be even more competitive than the numbers suggested with many properties not making it to market.
Flynn said he had heard from buyer’s agents that off-market transactions accounted for approximately 10% of total sales, with some agents reporting numbers as high as 30%.
He said this occurred through owners approaching tenants, informing them of their intention to sell at the end of the tenancy and offering them an opportunity to purchase.
“Many tenants see the benefits of buying such as no open homes and avoiding the need to move into a market that has record low rental availability. The seller gets the job done quickly and often without the need for real estate agents,” Flynn said.
Another trend Flynn has seen is from the buyer’s agents themselves with investor groups actively buying properties in certain suburbs, creating their own market influence.
“They almost have their own Warren Buffett effect where they go well, ‘hey, if we’ve got 800 people that all go and buy a property in this particular suburb, it will actually push the prices up anyway’,” Flynn said. “They pump money into cheap areas, driving up prices and artificially creating demand.”
Flynn has observed this east coast investor activity mainly in Perth’s outer suburbs, such as Rockingham, Mandurah, Clarkson, and Banksia Grove.
These investors focus on purchasing similar properties, typically older homes on large blocks. They rent them out, make minor improvements, increase rent, and hold onto them for the long term. As a result, listings in these areas become scarce, making it challenging for potential buyers.
“I’ve had a few clients through the Rockingham area that just can’t find anything online because there are no listings and its largely because of the way these buyer’s agents operate,” Flynn said.
“Obviously, banks do extra checks on that kind of stuff. If it’s sold off market, they’re going to do full valuations and try and make sure the price is fair. But how accurate is that process if a bunch of properties aren’t hitting the open market?”
How brokers can help their clients
While the fairness of the factors influencing the open market for buyers remains uncertain, Flynn recognises that the current conditions present both challenges and opportunities for brokers.
“As brokers, our of services could be quite narrow, but it usually ends up quite broad. We’re used to having clients contact us and ask for recommendations and we are the conduit to make things happen,” Flynn said.
Flynn said while a broker’s core business was in sorting out the mortgage, there were many other tasks that brokers needed to do in order to do what was best for their client.
“Just like you have your trusted building inspector or financial adviser, we’re heading into a space where if you don’t already have another string to your bow in have a trusted buyer’s agent, then you might need to get one,” Flynn said.
“Then you can say, well, it’s a minefield out there, but I trust this person or this company to do a good job for you.”
What do you think of buyer’s agents? Comment below.
