Housing affordability an issue in Western Australia despite favourable buying conditions

by Hayden Groves – REIWA President    https://reiwa.com.au/

Although housing affordability has improved in WA in recent times, it remains a legitimate concern for many Western Australians.

A recent Housing Affordability Report by the Real Estate Institute of Australia and Adelaide Bank showed why affordability improved in WA on an annual basis in the December quarter 2017 it had declined when compared to the September quarter 2017. It’s concerning that despite favourable buying conditions and record low interest rates, housing affordability remains such a pertinent worry for many Western Australians.

REIWA is a strong advocate for addressing housing affordability and we firmly believe current state property tax arrangements significantly contribute to this problem. When REIWA surveyed the WA public about this topic last year, respondents overwhelmingly told us that property taxes negatively impacted their lives. This is a growing issue and we need to do something to address it.

The good news is WA remains one of the most affordable states in the country for housing, particularly in comparison to east coast property markets like NSW where the median house price is higher and first homebuyers find it more difficult to enter the property market. Here in WA homeownership is still very much attainable.

In fact we have the highest proportion of first homebuyers out of any state or territory in Australia, with the Housing Affordability Report revealing 34% of all owner-occupier home loans in WA in the December 2017 quarter were to first homebuyers.

Additionally, although the average home loan amount to WA first homebuyers increased during the December 2017 quarter, it was still $50,000 more affordable than the average loan amount required in NSW – a considerable difference.

However, more needs to be done. While the McGowan Government continues to face a challenging fiscal environment, REIWA still believes an incremental reform of property taxes will encourage both owner occupation and investment.

The residential property market is a key contributor to state revenue, specifically through transfer duty – one of the most inefficient and ineffective taxes. In the long term, we would like to see the government transition to a broad-based land tax instead of relying on transactional taxes for revenue.

All Western Australians deserve to have access to affordable, accessible and appropriate housing stock. We call on the McGowan Government to commit to conducting a state tax review to look at more sustainable ways of funding essential services that don’t impact so heavily on affordability.

 

Perth Rental Market Firmer

reiwa.com – Home of WA Real Estate    https://reiwa.com.au/

Perth’s rental vacancy rate has dropped to its lowest in more than two years.

According to reiwa.com’s findings, it has dipped to 5.3%, the lowest since July 2015.

REIWA’s President Hayden Groves said Perth’s latest vacancy rate for January 2018 was also a significant improvement from June 2017.

“It’s quite remarkable to see it this low considering seven months earlier Perth’s vacancy rate soared to 7.3% – the highest we have ever experienced – and now it’s back at levels last seen in 2015,” he said.

Mr Groves said, “The vacancy rate is a good indicator for how the entire rental market is tracking, with reiwa.com data for February showing stable rent prices and declining listing levels – leasing activity did drop off in February, however levels are still healthy and trending above long-term averages.”

The reiwa.com vacancy rate is compiled using data obtained from a monthly survey of REIWA members. The survey details how many rental properties members manage and how many of those are vacant.

Mr Groves said there were a number of factors that had contributed to lowering the vacancy rate, such as an increase in population growth and a reduction in average tenure time.

“Population growth in WA has started to improve,” he said, “rental markets always feel the effects of population trends, with new entrants into the state the first to soak rental stock – tenants are also moving more frequently; in 2014, for example, the average tenure time was 45 months compared to 34 months in 2017 which is almost a full year less – which has led to an increase in leasing activity, which has driven demand for rentals.”

Mr Groves said another contributing factor was the reduction in the number of new dwelling commencements. “With fewer new dwellings coming on the market, existing new rental stock is being soaked up, which is why rental listings have declined 19% over the last year – after a challenging few years for landlords and investors, it’s pleasing to see some parity return to the rental market, with tenants and landlords seeing benefits simultaneously.”

Property managers are vital to a successful investment

Over the last couple of years there have been a handful of stories reported in the media where rental properties have been destroyed by tenants. While these types of incidents are relatively uncommon, it is worth noting that in almost all of these cases, the rental property in question was privately managed.

While it can be tempting to go it alone and manage your rental by yourself – premised on the notion of saving on management fees – deciding not to use the services of a licensed real estate agent is risky and can often cost you in the long run.

The amount of work involved in managing a property and how complex it can be is often underestimated. While the majority of investors chose to use a property manager, there are still around 40% of investments in WA that are self-managed. In my opinion, it isn’t worth the risk.

Management fees are not excessive and are normally tax deductible. It is a small price to pay for the peace of mind that comes with having a professional handle the tenancy.

A property manager will take care of the day-to-day tasks and responsibilities of managing a property, and they’ll be well versed on the Residential Tenancies Act. This is particularly useful if the property is damaged, maintenance is required or the tenant is being unreasonable.

As the owner of the rental, your emotional attachment to the property can be a detriment when dealing with the tenants yourself. A property manager acts as a link between the owner and the tenant, and will offer advice based on the best outcome for you.

A property manager also has access to the National Tenancy Database, so they can identify any applicants who have a poor rental history when it comes to paying rent and maintaining a property. This is priceless information and can help you select the most appropriate tenant from the start.

Although the latest reiwa.com data shows Perth’s rental market has started to improve, tenants still have plenty of rentals to choose from, which means investors need to ensure their property stands out. A property manager will assist you with a marketing campaign to give you a competitive edge.

Plus, they have access to websites like reiwa.com, which aren’t available to private landlords, so you can ensure your property is seen by as many people as possible.

When selecting a property manager, it is important you do your research. If you are negotiating with an agent about hiring a property manager, ensure you have a chance to meet them first.

You want to ensure you appoint someone who has excellent communication and people skills, is knowledgeable and experienced in the industry, pays attention to detail, and is professional and highly organised.

Finally, make sure they are a REIWA member, so you can be confident you’re receiving the best possible information and that your interests are protected.