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Capital Gains Forecast For Perth Property Investors Over 2022

2021 was remarkable for the Perth rental market, with record low vacancy rates, skyrocketing rents and steadily growing yields.

Despite this, the city’s property market remains comparatively affordable. So it’s probably not surprising that we are seeing increased demand from interstate investors wanting to capitalise on Perth’s potential.

After shrugging off years of stagnant growth, Perth is proving increasingly attractive to property investors. This has led some media commentators to forecast that it will become one of Australia’s hotbeds of property investor activity in 2022.

This certainly reflects what we are seeing here at Rentwest. At the tail end of 2021, we experienced strong enquiries from investors based in NSW, Victoria, Queensland and the ACT, all looking to snap up a Perth investment property. Due to closed borders, most were prepared to buy sight unseen.

In fact, we sold around four properties this way, all to investors from the Eastern States looking to enter the Perth market as soon as possible.

When WA’s borders reopen in February 2022, we expect more migration to cause demand to soar and, with it, price increases for sales and rental properties.

The current Perth market

As we wrote in our last market report, Perth vacancy rates hit a low of 0.9% in the third quarter of 2021, compared to a national vacancy rate of 1.7%. This tight rental market was defined by strong demand but equally scarcity of stock meant tenants had few properties from which to choose.

For some time now, WA metro rents have been among the lowest in the country. However, our city has recently been experiencing some of the biggest gains to median rents. CoreLogic data shows that Perth house rents increased by 14.6% over the twelve months to September, while Perth unit rental prices rose by 13.9% over the same period. This is well above the national capital cities average.

Data from Domain also shows rental yields for Perth houses reached 5.03% in the September quarter, up 4.2% year-on-year with yields for units rising 4.6% to reach 5.67%. These too were well above the combined capital city average of 3.56% for houses and 3.95% for units.

Top performers

Perth suburbs took out five places on CoreLogic’s list of the top 10 highest yields for houses nationally over 2021.

Armadale came in number five with yields of 7%, followed by Calista at six with 6.9%, then Medina at number eight with 6.9%. Parmelia with 6.9% and Orelia with 6.8% also made the top 10.

For units, Orelia hit number four nationally with a median yield of 8.1%, while Armadale came in at number six with 7.8%, and Kelmscott at number seven with 7.6%.

The future looks bright

There’s no disputing that Perth offers great yields right now, compared to the rest of the capital cities. But there is also real potential for further capital growth with REIWA forecasting 10% growth in Perth house prices in 2022. This means the median Perth metro house price would grow from $520,000 to $575,000 by the end of the year.

REIWA also forecasts that median rents will rise between 10 and 15 per cent over the course of next year.

Anecdotally, we’ve had investors enquiring about a range of properties that will rent easily: from larger blocks in the Baldivis area offering a good solid yield, to apartments in central metro lifestyle locations like North Perth.

It’s also worth noting that COVID-19 seems to have changed our property dreams, at least for the moment, and one very real trend we’re noticing is that people often want more space. This means landholdings have become more important, as have extra bedrooms, a home office and generous living spaces.

In this market, properties selling and renting well have the same fundamentals: they’re larger, near good infrastructure, schools, and offer good lifestyle appeal.

Our advice is that right now it’s a great time for investors to buy. However, if you’re thinking of selling your investment property, be patient and wait until the borders open in February – you may find you end up with a lot more for your property than you think.

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