The relaxation of international borders has invited an inflow of workers, tourists and international students, impacting property markets around Australia due to higher housing and rental demand.
Who’s benefiting? Certainly not first home buyers or those seeking rental vacancies. It’s still an investor’s market.
Since Australia opened its international borders this year, we are starting to notice a greater generation of foreign property investment and interest from imported workers, ultimately placing an upward pressure on prices. Renters already faced with soaring rental values and minimal vacancy rates are tackling a more challenging market.
Perth property experts have expressed concerns about a potential housing ‘catastrophe’ in the months since ‘Fortress WA’ has opened international borders, with 20,000-80,000 interstate and overseas migrants predicted to fight over only 8,000 properties for sale and 2000 properties to rent in Perth (according to CoreLogic’s latest statistics).
However, should we be concerned if the RBA and APRA have indicated that interest rate hikes and further home loan lending restrictions are around the corner?
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About WA’s property market
In Perth, house prices rose by 13.1 percent in 2021 according to CoreLogic, while national house prices increased by 22.1 percent over the same period. Perth’s slower price growth rate is attributed to weaker housing demand from the lack of interstate migration caused by border closures, making Perth housing among the most affordable in the country.
Since WA borders opened in March 2022, Perth house prices are expected to continue growing by 10 percent this year due to increased demand from interstate and overseas arrivals in addition to low housing supply.
While WA residents have been making the move out of Perth, there will be more people coming in on average, promoting a second burst of activity. In fact the latest state government projections released in December predicted WA’s population would grow by one per cent in 2022-23 (26,800 people), 1.3 per cent in 2023-24 (34,840 people), and 1.4 per cent in 2024-25 (37,520 people).
This year, the relative affordability of Perth property prices compared to the rest of the country will not only support further price growth but will attract more investor demand from the eastern states. This will benefit cities like Brisbane and Adelaide that have already experienced substantial house price growth and are hoping for a market cool off.
Given borders have been open for longer, buyers and renters looking for a scenery change have already made the move from Sydney or Melbourne to either regional locations within their own states or to Queensland and South Australia.
This has placed an upward pressure on Brisbane’s house values by 15.4 percent over the year to September 2021 to $702,455, while Adelaide’s soared by 20.1 per cent to a median of $667,888.
Perth’s rental market
If investors are now dominating the Perth property market, it’s not good news for those seeking to rent. The rental market was very competitive in 2021, experiencing an annual growth rate of 11.5 percent according to REIWA, with vacancy rates dropping to a four-year decade low of 0.7 percent in the December quarter.
With WA international borders now open, this is good news for property investors and landlords, placing an upward pressure on Perth vacancy rates and rents. Perth rent prices are now forecasted to rise faster than the national average, with REIWA predicting a 10 to 15 percent increase in rental values as demand outstrips supply.
However, it’s clear that there is an existing issue with rental stock in WA and the positive net flow of people into the State will further perpetuate the issue. While new migrants would typically rent for the first 12-23 months before settling into a house purchase, this is becoming ever more unrealistic.
Assuming that 30,000 families try to rent, and there are only 2000 properties to rent, it’s possible that the result will be a major rental shortfall catastrophe. This lack of rental availability will ultimately have an impact on the number of people who come to WA for work, with subsequent negative consequences for the existing skills labour shortage.
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