Interstaters eyeing Perth’s residential potential

(Picture: Golden Group)

Investors from outside Western Australia are sharpening their focus on Perth, with affordability, comparatively high rental yields and the potential for capital growth creating a surge in interstate enquiry.

Jennifer Wakeman, the general manager of property investment firm Momentum Wealth, said enquiry from outside WA was currently 108 per cent higher than at this time last year.

“The uptick in investor enquiry is being driven by the greater affordability of the Perth market amid rising cost concerns in the Sydney and Melbourne markets in particular,” Ms Wakeman said.

“Investors looking towards Perth are not only benefiting from more affordable entry into the market, they’re also getting more for their budget in terms of land value, property size and proximity to the CBD – all key drivers of capital and rental growth.”

Rental yields in Perth are currently sitting at 4.4 per cent, well above the 2.4 per cent and 2.7 per cent available in Sydney and Melbourne, respectively.

Ms Wakeman said those yields combined with the relative affordability of Perth properties made the WA capital a compelling proposition for east coast investors.

Data from the Real Estate Institute of Australia recently named WA as the nation’s most affordable state, with just 26.5 per cent of an average family’s income needed to meet average mortgage repayments.

“There is no doubt the Perth property market is in a sweet spot for investors right now, given the opportunity to leverage both yield and growth as the market moves further into its upswing,” Ms Wakeman said.

“Investors looking towards Perth are not only benefiting from more affordable entry into the market, they’re also getting more for their budget in terms of land value, property size and proximity to the CBD – all key drivers of capital and rental growth.”

Ms Wakeman said low levels of listings and strengthening economic indicators pointed to the current growth phase to continue through the next few years, despite recent forecasts from CBA predicting a dip in home values to occur in 2023.

REIWA data showed listings for sale have almost halved from a peak of 16,969 in November 2015, with just 8,513 properties listed each week in October, on average.

“We’re continuing to see strong tailwinds for future growth in the form of low stock levels, sustained buyer demand, a large pipeline of mining activity and strengthening macro-economic drivers like rising household consumption, so we don’t anticipate this upswing to ease in the near future,” Ms Wakeman said.

“Perth remains the most affordable capital city of any state in the country when compared to income, so even if interest rates rise in 2022 or 2023, it will slow down the growth but won’t derail it.

“In the medium term, we do expect more stock to enter the market as we start to see the impact of dwelling completions, but this will largely impact the oversupplied outer suburbs where this stock is being developed.

“Those who have bought well, in established areas with limited development potential and hence less oncoming stock, will continue to benefit from a stronger long-term performance.”

Read more at API magazine.