THE gap between renting and buying is closing, with conditions for buyers the most favourable in five years according to the latest REIWA and Curtin University Buy-Rent index.
The index reviews a range of data to determine when home ownership is more financially advantageous than renting.
“With Landgate data showing Perth’s median house price is the most affordable it’s been in six years and reiwa.com data showing Perth’s median house rent increased by $10 per week during the September quarter, the latest Buy-Rent Index has shifted more heavily in favour of buying,” REIWA president Damian Collins said.
“Another contributing factor to the improvement in affordability is declining mortgage rates, with the 10-year average having dropped from 7.3 per cent (1998 – 2008) to 6.2 per cent during the last decade (2008 – 2018).”
While it may still be considered slightly more advantageous to rent, people looking to buy can choose from many affordable suburbs, including locations near the coastal.
Armadale and Camilla are Perth’s cheapest suburbs, both have a median house price of $240,000, followed buy Calista and Hillman at $250,000, well below the overall Perth median of $505,000.
Mr Collins said the September quarter 2018 index showed median house prices in Perth would only need to increase by 2.9 per cent annually over the next 10 years to $658,000 for house purchases to be considered more financially viable than renting.
While this may seem difficult to achieve, with the Perth market referred to as subdued and said to be in the midst of the longest downturn in 30 years, price growth is still possible and many suburbs recorded over 2.9 per cent growth in their median price in 2018.
Some saw incredible growth including Cockburn Central (120.8 per cent), Pickering Brook (113.8 per cent), Burswood (75.2 per cent) and O’Connor (52.7 per cent).
Several suburbs have also recorded average annual growth greater than 2.9 per cent over the past 10 years.
In the longer term, the 15-year annual average house price growth rate is 5.1 per cent, which Mr Collins said boded well for buyers.
Over the next 12 months changing conditions in the rental market could also make buying a home even more attractive, with a falling vacancy rate and declining stock levels potentially leading to rent increases.
The vacancy decreased to 2.9 per cent in December 2018, the lowest level experienced in Perth since March 2013.
Properties available for rent dropped 6 per cent to 6865 over the month and were 27 per cent lower than 12 months ago.
“If the rental market remains on its current upward trajectory, we should see rent prices increase throughout the year,” Mr Collins said.