02/02/2011 - 06:44

Rent rise could trigger recovery: REIWA

02/02/2011 - 06:44

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Rents are set to rise in Perth as competition between tenants hots up, and the tightening could help trigger a recovery in the broader residential market, REIWA president Alan Bourke says.

Rent rise could trigger recovery: REIWA

Rents are set to rise in Perth as competition between tenants hots up, and the tightening could help trigger a recovery in the broader residential market, REIWA president Alan Bourke says.

But Mr Bourke warned that it was the only bright spot in an otherwise grim market, where historically high listings were pushing down house prices.

Speaking at an Australian Property Institute and Financial Services Institute of Australia function, Mr Bourke said falls in median house and unit prices had wiped out any property gains in the past three years, with median prices now back to December 2007 levels.

Turnover had also taken a substantial hit, even as the number of listings ballooned by 50 per cent since this time last year. In January 2010, there were just over 10,000 residential properties listed for sale, while the current figure is 15,300.

"We have had five quarters of decline in activity and that's pretty much unprecedented," Mr Bourke told the forum of 450 property industry members.

"In the December quarter, our turnover was 25 per cent below 15-year averages. We need something like about 8000 transactions per quarter and we were sitting there with about 6000."

When similarly poor figures were recorded immediately after the global financial crisis hit in late 2008, the Federal Government had stepped in with a boost to the first home owners grant and interest rates dropped sharply.

"This time, we aren't going to get any interest rate subsidies so it will be interesting to see what prices do over the next 12 months," Mr Bourke said.

But while the options for capital growth on housing were limited, Mr Bourke said the rental market could be a factor in the eventual recovery.

 "The good news story is the rental vacancy factor," he said.

"We have moved from 4.5 per cent vacant to around 3.5 per cent and I imagine that by the March quarter it could be 2.5 per cent and that will be the first sign of rents going up. Traditionally there is a very high uptake in January and talking to agents around the place, they are talking about a 0.5 or even 0.1 per cent vacancy rate on their books.

"If that's the case, we will start to see rentals rise.

"There is competition for tenants again and we haven't seen that for about 18 months or so.

"If you are an investor, you will start to see rental growth and that may be the catalyst for improvement in the market. Investors want capital growth or yield or both and the yields are improving and that may entice investors into the market.

"It could also entice renters into the market because they will be saying 'if I am paying $500 a week for rent, it may be appropriate for me to go buy one for myself'."

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