RENTAL markets across Western Australia have tightened up as supply has dwindled alongside demand increasing.
Elders State real estate manager Drew Cary said he expected the market to shift dramatically once the rental moratorium, which was enforced to protect tenants during the height of COVID-19 lockdowns last year, was lifted.
"I haven't been surprised, mainly because the regional markets were on a bit of a knife edge as far as supply and demand goes prior to the moratorium, so in some ways we knew this was coming," Mr Cary said.
"Tenants had security for six months which interrupted the market forces at the time.
"We had seen a steady trend of increase in demand and decrease in supply prior to the moratorium, then the moratorium hit and it put a freeze on everything for six months while underlying market conditions continued, so when the moratorium lifted suddenly we were out of balance straight away, which caused the immediate jump in rents, regionally and in Perth."
Data from CoreLogic showed the northern regional market saw a 15 per cent increase in annual rents to the 2020-21 financial year.
Mr Cary said the North West has been a major rental hotspot, across towns such as Karatha, Dampier and Onslow.
"All the mining towns are very hot at the moment because there is high demand for mining projects which immediately puts pressure on the marketplace, which is very finite with lots of competition," he said.
CoreLogic reported that the southern regional market (Great Southern and South Coast) had a 15pc rise in rents annually, followed closely by Bunbury with 14.7pc and the Wheatbelt with 9pc.
Mr Cary said the Busselton/Dunsborough/ Margaret River region's boom has also been driven by the mining industry.
"A lot of FIFO (fly-in, fly-out) workers choose to move to the South West as the Busselton airport services a lot of regional mining communities - so workers have a choice; they can live in Perth or in the South West," he said.
"Because a lot are choosing to move to the South West, many are unsure about where to buy yet so they want to rent, which has put pressure on the rental market that wasn't there before in an already slightly unbalanced marketplace.
"In addition, as a result of COVID, people are choosing to move to the country and are uncertain, so they want to rent first."
Regional rents are heavily impacted by local industries, as developments in the lithium industry have driven the Bunbury and Bridgetown-Greenbushes markets in a similar scenario to the North West.
"So where industries arrive in regional towns and add to the employment load, then immediately it adds to the rental load," Mr Cary said.
Rental values are very demand-supply sensitive and move more fluidly compared to the sales values.
"The rental market is quite flexible price-wise and happens quite quickly, whereas the sale process takes place over months, meaning it takes a lot longer for the agents to recognise that there is quite strong demand pressure on the supply of sales stock, for them to respond with pricing," Mr Cary said.
He said investors have started to return to the marketplace as rental returns have strengthened, which has added "fuel to the fire of demand".
"Now there are extra buyers in the marketplace who weren't there last year, who are competing with the regular home buyers and putting pressure on demand and price," Mr Cary said.
"The price of rents have gone up and houses haven't, so there's a gap in the market - rents are quite good compared to the property price.
"That won't last forever, eventually investors will cause a price surge, which will put prices up as well and we are starting to see a little bit of that now and I think that when we look back at the end of the year, most regional towns will see double digit (10pc or above) annual (sale) price increases across the past 12 months and that's the sign that the market is finally starting to lift back into balance."
As for what to expect for the WA rental market in the near future, Mr Cary believed the Perth market would balance out as investors return in the next six to 12 months, which will lead to rents stabilising.
For the regional rental market, Mr Cary anticipated rental prices to continue to rise "until they become attractive enough for investors to look at them before they look at Perth".
"Generally the regional markets from Geraldton to Albany and Esperance lag six to 18 months behind the Perth market, while some centres come back quicker like the South West," Mr Cary said