Families are moving to Western Australia, increasing rental demand and discretionary spending
It seems like Western Australia is once again experiencing a growing population, and there are two positives that have come out of it, according to Craig Gemmill, managing director at Gemmill Homes.
First, the population growth soaks up the existing housing stock. With supply affected, people will either move to the next level of pricing or build new units, Gemmill said. Second, the population growth creates a sharp decline in the state’s vacancy rates, which already saw a considerable drop after reaching 7.3% in July last year.
Figures released by Real Estate Institute WA show that the vacancy rate dipped to 3.9%, a level last seen in 2015.
In an interview with MPA, Gemmill said that Western Australia’s population slump resulted when projects in the state ended and demand for its resources eased, causing people to look for work in other states, vacancy rates to increase, and housing demand to drop dramatically.
When people were leaving Western Australia, the number of available properties made it a tenant’s market. Now, the situation is becoming more favourable for landlords, making it a great time for investors who can now get around a 5.5% return, or 7% when they claim the 2% depreciation.
“The growth represents a fantastic opportunity for investors and first home buyers to take advantage of low prices, stock availability, and great returns,” Gemmill said.
Out of the mining boom
After it saw a 60,000 drop in 2015, the annual population growth of Western Australia has steadily climbed in recent years. According to CBRE, the state enjoyed a 21,000-person net increase in the past twelve months alone. The population of the Perth and Peel region is expected to surpass 2.2m residents by 2031.
“Population growth is a direct result of the mining boom,” Gemmill said. “The growth is a knock on effect by the jobs created by the resource sector. It saw families move to WA, which increased rental demand, and discretionary spending on entertainment, schooling, and eating out. It also increased trades to service the demand for new housing.”
According to Gemmill, there typically comes a time when the next part in a housing cycle is up. Most industry pundits call this phase “growth again.” With low interest rates and unique first homebuyer funding, he finds that there has never been a better time to take the first step on the property ladder than now.