Western Australia’s economic woes have had a negative impact on the property market, with Perth’s once booming apartment market seeing a major slump. According to SQM Research, an Australian investment research house, Perth’s residential rental vacancy rate was 5.2% in August.
Vacancy rates in the Perth metropolitan area have risen 2% over the past two years. After dropping 9.5% over the last year, Perth rents are now at their lowest level since 2011.
While some property analysts say the post-mining boom market is readjusting to more “normal” price levels, a looming apartment glut in Perth has many analysts concerned about further complications in this sector.
"We've had a lot of development of apartments in the inner city ring and that's where the developments sites have really gone from being feast to famine. They were red hot a couple of years ago, not so much…today,” said Gavin Hegney, an independent property valuer.
According to the Australian Bureau of Statistics, building approvals in Perth have dropped 120% in recent years.
"People are bailing out of their investment properties, saying, ‘I'll just quit the investment property, I don't like this investment property anymore.’ So that usually spells when you're at the bottom of the market,” said Hegney.
Nationwide forecasts are just as grim. Morgan Stanley analysts, led by Daniel Blake, said there would be a swift halt to apartment construction amid expectations of a glut of around 100,000 properties by 2018.
Hegney believes that the price falls in Perth are a sign of things to come for the east coast capitals. "Off the plan sales creates demand for two properties, when the real demand is only for one. When people move into their new apartment they have to move out of their rental accommodation or sell their existing home," he said.
"That's when you get the problem and that's what's coming for Sydney, Brisbane and Melbourne."
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