- WA investment distance doubles as eastern investors flock to Perth.
- Perth property investment driven by affordability and investor-friendly legislation.
- As eastern investors capitalise on Perth's allure, property dynamics are impacted.
Remote investing is on the rise in Western Australia (WA), with investors from the east coast scrambling to secure Perth properties, lured by its relative affordability and investor-friendly laws, according to MCG Quantity Surveyors managing director, Mike Mortlock.
The company’s research has found that remote investing skyrocketed in 2023, with the distance between where landlords lived and where they invested nearly doubling in the past year.
In 2022, there was an average distance of 857 kilometres (km) between a property owner’s home and investment. This year, the distance ballooned to 1502 km.
Morlock said that this represented a continuing pattern. To illustrate, by the end of 2021, the distance doubled from January 2020’s 294 km to 559 km.
WA is the centre of Australian property investment
Mortlock stated that underlying the data were two crucial insights.
“Firstly, property investors remain agile and will park their capital in whichever investor-friendly national location and asset type offers the greatest possibility of maximising their return,” he said.
“The second is that WA has become the centre of Australian property investment. There’s little doubt its popularity with real estate buyers from the east coast has increased the gap between home and investment.”
“WA, and more specifically Perth, has seen a substantial uptick in investor participation for several reasons.
“WA is now considered among the nation’s most investor-friendly jurisdictions.”
A major factor driving the trend was the lower cost of Perth properties compared to their eastern counterparts like Sydney or Melbourne.
Perth weekly asking property prices
According to SQM, Perth’s combined weekly asking property price for the week ending 21 Nov 2023 was $761,579. Sydney’s combined weekly asking property price was $1,423,106, while Melbourne’s was $1,015,455.
Investor-friendly legislative environment
Mortlock also argued that the east-coast governments’ recent pro-tenancy stance has caused investors to look elsewhere.
“There remains a raft of ill-conceived legislative moves among east-coast political parties which are playing to WA’s advantage.
“Talk among investors is that tenancy legislation, compliance costs and increased tax burdens in our most populous states are forcing their hand when deciding where to purchase or build an asset.
“Unfortunately, the anti-investor rhetoric continues in the east. Just recently, The Greens Lord Mayoral candidate for Brisbane said he’d introduce changes that would substantially increase council rates for some investors. The outcome of that would severely impact property investment there and would be devastating for tenants in that rental market.”
Here, Mortlock referred to Greens’ Brisbane lord mayor candidate, Jonathan Sriranganathan’s proposal to raise council rates by up to 750% should they fail to keep rents at or below January 2023’s levels.
Remote buying is here to stay
Underpinning the remote buying trend is how property investments have evolved over the past five years.
“We are all aware that it’s easy to conduct business over long distances nowadays – and that convenience extends to property investment. Engaging with almost any buyers’ agent, conveyancer or building inspector in Australia is a very simple matter.
“This has opened up all Aussie markets to smart investors. They can conduct their own analysis while employing professionals in their areas of interest to complete their work at ground level.”
Mortlock projected that remote investing would continue to build momentum in the long term, although the average distance would probably level off.
“Investors will continue to grow comfortable with buying remotely and sight unseen as the calibre and quality of data improves.
“That said, I suspect that when the current WA investment flurry eventually cools, we may find the distance between home and investment plateaus.”
Perth buyer frenzy largely driven by FOMO
Echoing Mortlock’s observations, Resolve Property Solutions director and local buyer’s agent, Peter Gavalas, previously noted a heightened out-of-state demand for Perth properties, which he believed to be driven by a fear of missing out.
“The market’s never been this tight. Houses are being snapped up at record speed, and with median time on the market at an all-time low of eight days in October, buyers are feeling the urgency,” he said.
However, his tone was more grim as he pointed out that the buying frenzy was causing home prices to catapult upwards and listings to dwindle further.
The buyer’s agent said that, along with the relative affordability of Perth’s homes, investors were attracted to the state’s paltry vacancy rate of 0.4%.
Perth residential vacancy rates
“The lack of available rental properties has pushed rents higher and encouraged investors to enter the market,” Gavalas said.
What role do investors play in the market
With Perth’s residents struggling through the worst parts of the housing and rental crisis, the news of a surge of out-of-state investors snapping up what’s left in the market will likely be distressing.
Perth total property listings
Nevertheless, Mortlock pointed out that investors were critical in facilitating the delivery of more affordable rentals in the long term.
“I think what is forgotten in the housing affordability debate is rental affordability. Property investors have been leaving the market, and this can only be good news for Perth renters who are in a crisis of accommodation,” Mortlock told The Property Tribune.
“We do also know that investors do tend to increase demand for new housing.
“From the 1950s right through to now (and probably forever), three out of every 10 households choose to rent. The size of the rental pool has failed to keep pace with the size of Australia’s rental population since 2017.
“Every day, Australian property investors fund the supply of 92% of the national rental pool. Most people don’t realise that the current volume of government-owned rental properties of 300,000 is the same volume as in 1976.”
“Australia’s failure to provide an environment which encourages investment is the sole cause of the rental pool not being deep enough.”
Mike Mortlock, MCG Quantity Surveyors Managing Director
“Unfortunately, that means some tenants are living in makeshift accommodation while those who are lucky enough to keep a rented roof over their heads are forced to compete hard with other tenants. That forces rent prices up,” he added.
“As a nation, we want to be homeowners, but people aren’t born that way. Typically, they will rent first. Without affordable rentals, it’s impossible to save towards that dream.”