Despite displaying resilience amid the COVID period, with dwelling prices and population surging, Perth still has yet to come close to the investor interest levels seen during the last housing boom, an expert said.
NuWealth’s managing director, Daniel McQuillan, has cited “buyers’ fright” as one of the main reasons behind Perth’s subdued recovery — despite several fundamentals of the local property market seeing improvement over the past year.
In January 2021, investor lending amounted to just $336.6 million — around $100 million less than the $438.4 million borrowed by investors a decade ago, Mr McQuillan noted.
“Property investment lending to investors has never fully recovered from the peak of the last housing boom back in 2014 when, during some months, investment lending rose to above $1 billion per month,” he said.
Further, nearly 80 per cent of all investor lending across the state went to purchasing established housing as opposed to purchasing or building new homes.
“[This means that] only a trickle of brand-new rental properties is coming into the rental market,” the managing director said.
As a result of these current trends, Mr McQuillan has predicted a “rental famine” in Perth over the coming months.
He expects that weekly rents could rise by over 20 per cent following the lifting of the COVID-19 moratorium on rent increases, which occurred on Sunday, 28 March 2021.
Looking ahead, Mr McQuillan encouraged investors to overcome “buyers’ fright” and instead trust the fundamentals.
He has highlighted Perth property prices as on their way up, with many areas offering rental returns above 5 per cent.
Further, Western Australia has recorded the highest population growth rate across states and territories based on figures from the Australian Bureau of Statistics (ABS) for the September 2020 quarter.
“The sad fact is that these property investors who are suffering ‘buyers’ fright’ are financially missing out on a golden opportunity to make big profits in the Perth real estate market,” Mr McQuillan said.
“I have one client who has already lost $100,000 because they backed off buying a 400 sq m lot in a Perth riverside suburb one year ago. They could have bought this lot for around $400,000 in March 2020 and now you can’t find a similar lot in the same suburb for under $500,000.
“Based on current trends, the same investor will be lucky to buy a similar lot in the same suburb for under $600,000 by the end of this year.”
According to the managing director, until investors get over the buyers’ fright syndrome, rents are likely to continue to surge in Perth.
Meanwhile, those who buy now — or have even just bought — could make big profits over the next two years, he said.
NuWealth’s own research has found that only 30 per cent of investors make money in the Perth real estate market because they bought before the boom, while the remaining 70 per cent lose money because they adopt the herd mentality and bought at the top of the market.
“The big challenge for astute property investors is to overcome this ‘buyers’ fright’ syndrome and purchase well-located property in Perth now to lock in future profits,” the managing director concluded.