This dynamic is playing out across the country.
So this recent property sale caught my attention, and it really brings home how far-spread the rental crisis is right now.
I mean it’s gotten all the way to Perth! That’s practically a different planet.
But it’s basically the story of a property that sold lightning fast – just three days on market.
The property itself was decent. A two-bedroom, two-bathroom apartment with single car bay at 3/21 Altona Street, West Perth.
Altona street is West Perth’s premier street (I’m told), and so it was a tidy property that was well located.
But that’s not why it sold so fast.
It sold so fast because the rental market in Perth is ‘next level crazy.’ According to the agent who sold it:
The rental scene is next-level craziness. People here who are in short stay accommodation or in rentals that are about to expire are flooding home opens.
People are moving to WA for the work. They’re finding it impossible to find accommodation to live, and they do what normal people do – go to rental inspections and opens. We’re getting anything from 50 to 100 groups at the rental apartment inspections.
We put this [for sale] apartment online on the Thursday. On the Saturday, the first home open had 15 groups of people there. It was a mixed bag – a few investors, a few owner-occupiers and this bunch of local tenants or people in short stay accommodation.
The [buyer] is a young professional, in his mid-30s. He rocked up with his mum. He’d recently returned from Sydney in the new year. He’d been on his own for 10 years in Sydney. He was preapproved and was not prepared to live with his parents again. He bought that afternoon. We gave him possession prior.
Are you seeing what’s happening there? The rental market is so tight – there are so few rental properties around – that this buyers decided to skip the normal stage of moving to a new city and renting for a while – and jump straight in to buying.
He’s not alone. The agent reckons that people aren’t looking to get into property ownership so much as they are looking to escape the rental market:
It’s quite gnarly out there.
In January, we had a couple who’d moved from NSW. They were in short-stay accommodation. They were looking everywhere to rent, from Joondalup (26km to the north) to the city. They decided to buy an apartment in Northbridge (in central Perth) for $369,000 – it was cheaper than renting. They bought it on 21 days (settlement term).
They’ll buy their next home once they’ve decided where they want to settle. They’ll rent out the apartment when they’re done.
I think this is something people don’t appreciate about how a tight rental market affects property prices.
Not only does it increase the value of properties because the return on the asset is going up, it also pushes up properties because renters are forced to make that jump into property ownership if they can.
I think this is one of the reasons why the property price falls this cycle have been quite mild, despite a very aggressive round of rate hikes from the RBA.
And it’s why I don’t think prices will fall all that much further. Maybe a bit. But probably not too much.
Everyone needs a roof over their head.
And rooves are in very short supply.
DB.