Perth is firmly in investors’ sights in 2022 – and there are good reasons why. We look at what’s driving investor interest, and what this means for the market in the coming year.
It’s no secret Perth’s property market has enjoyed a significant rebound over the last two years. In December 2021, CoreLogic reported that values had climbed 22.1% since November 2019.
More recently, the research firm says Perth notched up property price gains of 11.2% for the 12 months to February 2022. Add in rents, and investors pocketed total returns of 16.1% for the year.
While the CoreLogic numbers look at the overall Perth market, if we drill down to individual neighbourhoods, it’s clear that plenty of suburbs have delivered impressive price growth.
Data from the Real Estate Institute of WA (REIWA) confirms a wide variety of suburbs – both north and south of the Swan, recorded tremendous capital growth over the last year. We’ve selected just a handful of neighbourhoods to give you an idea of the variety of top-performing suburbs:
- Claremont: +19.7%
- Dalkeith: +18.9%
- St James: +18.65%
- Kensington: +17.82%
- South Perth: +15.38%
Plenty of steam left in the market
Looking ahead, experts are predicting there’s plenty of fuel in the tank for the Perth market to deliver further gains in 2022.
REIWA data shows stock levels remain tight across the Perth market. Listings are half what they were three years ago, and Damian Collins, REIWA President and Managing Director of Momentum Wealth, says, “More people arriving in WA when the border re-opens will add to housing demand and keep listings below historical averages.”
In fact, REIWA forecasts show Perth values are expected to rise 10% in 2022 alone. Damian explains, “Perth values are still below the June 2014 peak, so there is plenty of upside for investors who get into the market early.”
Perth rents soared in 2021; yields continue to outperform
The potential for capital growth isn’t the only reason Perth is set to shine in 2022.
Perth has offered significant rental returns for investors over the last year, with median rents rising 12.5% in the 12 months to February 2022 according to REIWA.
At the same time, data shows that rental listings in Perth were down by 21.6% across the same period, highlighting the ongoing tightening of rental supply. This means competition for available rental properties looks set to remain strong in 2022.
What’s fascinating about the Perth market, is that it has bucked the trend of most state capitals, where rental yields have declined over the last year.
Perth is an exception. The market continues to offer strong rental yields of 4.37% according to CoreLogic’s Q4 2021 report – making it the second highest-yielding capital city market across Australia behind Darwin.
“Strong yields in tandem with rising values are something of a holy grail for investors,” said Damian. “Perth is ticking the boxes for both at present, and not surprisingly, it’s driving increasing levels of investor interest.”
WA economy leads the nation
One of the key factors driving the buoyancy of Perth’s property market is the outstanding health of the WA economy, which grew by 4.3% in 2020-21 – the strongest across all Australian states for the second consecutive year.
The McGowan Government’s mid-year review in December 2021, shows the economy is expected to grow by 3.5% in 2021-22, the fastest growth in eight years.
In addition, ABS figures show WA is starting the New Year with Australia’s lowest unemployment rate of 3.4%, which is below the national average of 4.2%.
In 2021, jobs growth attracted interstate migration to WA despite the COVID border restrictions, with the state recording the second highest net interstate migration growth nationally for the year ending June 2021, behind Queensland (ABS).
“As migration resumes when border restrictions ease, demand for rental housing is only going to grow further,” says Damian. “Figures from SQM Research show Perth has a vacancy rate of just 0.6%. This is a fraction of vacancy rates in Sydney and Melbourne, which are currently 2.6% and 3.2% respectively.”
Making equity work harder
Perth’s rising home values mean many WA home owners and property investors have amassed considerable equity in their home or rental property in the last 24 months.
Damian says now could be the time to put that equity to work by getting into the market to start or expand your property portfolio.
“2022 is expected to be a bumper year for the Perth market,” he says.” And today’s investors are well-placed to reap the rewards of a rising market coupled with high rental demand – all while interest rates remain at historical lows.”