Perth’s rental market faces a triple threat
A drop in rental vacancies, fewer properties on the market, and the potential capital gains tax review are causing a triple threat in the West.
PERTH’S vacancy rate dropped to 2.0 per cent in March, according to the Real Estate Institute of WA.
The latest fall comes after the rate tightened from 2.6 per cent in December and January, to 2.2 per cent in February.
REIWA President Suzanne Brown said the decreases were concerning, with rental supply facing a triple threat.
“Adequate supply is key to a healthy rental market, and in WA we rely on investors to provide over 86 per cent of private rental supply,” she said.
“However, they are being targeted by both the State and Federal governments.
“At the Federal level, changes to the Capital Gains Tax discount and negative gearing are almost guaranteed at the next Budget.
“In addition, a recent news story teased a change to ‘no grounds’ terminations at the WA Government’s May budget.”
Ms Brown said speculation about these potential changes was causing significant uncertainty.
Members had reported some investors pulling out of property to put their money into “more stable” assets.
“The WA market has not fully recovered from the last mass exodus of investors,” Ms Brown added. “Another drop in supply will be detrimental for tenants.”
She said the vacancy rate could fall further, and competition for property will increase leading to higher rents.
Ms Brown said compounding REIWA’s concerns were the conflict in the Middle East, and the end of the National Rental Affordability Scheme (NRAS) in June.
“The war is already affecting the cost to build a home,” she said. “It is also affecting the supply of land and will delay completions due to increases in development costs.
“As we saw during COVID, when the new homes market is constrained, the rental market bears the brunt as the system’s shock absorber.”
The completion of the NRAS will see about 1,500 affordable rentals return to market rates.
“If rental supply declines further, these tenants will face significant affordability challenges.
“Many may try to turn to social housing, which we know has a long waiting list.”
She called for stable policy settings and a focus on creating new supply, not by targeting investors.
