‘Unsustainable’: Why Perth’s falling house prices won’t fix the city’s rental crisis

Perth property prices may be going down, but no reprieve seems to be coming for renters.Domain’s latest quarterly Rent Report, released Thursday, shows rental price growth stalled in Perth, with the median asking price still sitting at $750 a week.Domain’s chief residential economist, Dr Nicola Powell, said it would take more properties being listed to see rental prices come down.“For rent prices to go down, we really need to see more rental supply, and I think with property prices falling, that in itself is also a deterrent for investors because investors like to enter a market and have the benefit of capital growth,” she said.“If property prices are stalling or falling, that also becomes the deterrent of looking elsewhere. But ultimately, I think to alleviate Perth’s rental market, we need to see higher levels of rental supply, or just general supply, not necessarily rental supply.“More housing supply, more affordable supply, whether that’s in the rent space or providing greater diversity of choice for first home buyers as well.”Powell said the high price point and cost of living struggle across not just WA, but Australia as a whole has significant social impacts.“It has impacts on housing formation. Adult children are staying at home for much longer periods of time because they just can’t afford or find or secure a lease,” she said.“That flow on impact changes then how we use our homes, what we need from our current homes, and also what a renter needs when they first move out of home or if they’re much older, that changes what they need from that type of rental.“Over the past five years, rents have gone up 67 per cent [in Perth] and I don’t think anybody’s wage has gone up that much over that period of time.”Perth’s rental vacancy rate is sitting at 0.4 per cent, down from 0.5 per cent in the June quarter and 11.3 per cent over the year.Powell says the reduction in listings in the state shows that people are still desperately on the hunt for a rental.“Listings reducing signals a high level of demand,” she said.“We may be seeing that some tenants are just rolling over their leases rather than finding a new one, and using the power of negotiation of being a great tenant over the past year or over the time they’ve been in their rental, rather than actually hitting the rental market.“There may also be a little bit of fear from tenants out there. If they’re in a lease at the moment to, then go out again and try and secure another lease, they may not want to do that knowing how competitive and how tight the rental market has been in Perth.”The suburbs across Perth with the highest median rental prices include Dalkeith ($1700), Swanbourne ($1650), City Beach ($1450) and Burns Beach ($1350).On the flip side, the suburbs with the most affordable median rental prices this quarter were Mandurah ($550), Medina ($560), Calista ($563) and Hillman ($580).Powell says coastal lifestyle and sought after amenities are what drives price points up for rentals, but in cases like Mandurah, it’s the increase in supply that keeps prices low.“There is much greater housing supply in Mandurah than when you compare it to locations like Dalkeith, Swanbourne and Burns Beach,” she said.“They have got like 40 to 45 rentals but when you look at Mandurah, there are 372 houses that were for lease over the last 12 months, and 165 for units.“So I think Mandurah has a large stock of detached housing. There are higher levels of residential development, and therefore more rental properties available, helping to keep rents more competitive compared to other locations.”Shelter WA chief executive Kath Snell said the median price for a rental home in WA was unsustainable for many renters.“So many renters across WA are treading water. They are struggling to afford their rent and find the funds to pay for rent increases,” Snell said.“Every time rents rise, renters are having to make impossible decisions about their basic needs; whether to go without food, doctor appointments or other essentials just to keep the roof over their heads.“Spending $750 a week on rent is expensive and unsustainable for many Western Australian renters. That would consume half the take-home pay of a person earning $100,000.”Snell said that WA is in the thick of a housing and homelessness emergency, which had hit renters hard.“Families are extremely worried they could be forced to live in a tent or car because they have no other option,” she said.“Just a few years ago, Perth was considered one of the most affordable capital cities in the country, and now it is one of the least affordable for renters.”She says an easy way to fix this problem was to implement a rent cap across WA.“Rents are rising at alarming rates and the only way renters will be able to keep up is by introducing the practical and fair measure of a rent cap,” she said.“This will provide the relief that renters desperately need.”Property listingsFrom our partners