What a difference the holiday period makes! In the span of just a few short weeks we have found ourselves working each day in January, 2023, with a larger number of serious apartment buyers. The buyers are pre-qualified with their finance and know exactly what they are looking for. With their new year’s resolutions firmly front of mind and very good properties available to purchase, my team and I at Inhabit Property have been consistently writing solid offers since New Year’s Day, most of which are meeting the needs of our sellers and ultimately being accepted. It is shaping up to be a good month of sales this January.

With interest rates continuing to rise it is reasonable to expect that as the cost of borrowing increases the number of buyers in the market decreases. This is true for most markets however the WA apartment market is a unique beast and one that moves in its own way. After 15 years selling WA strata apartments even I question why the WA apartment market does what it does.

On the ground level we are seeing the following two players becoming more active in the apartment market:

1. The residential property investor – New investors as well as seasoned investors living here and interstate are jumping on affordable strata apartments that are providing solid weekly incomes plus good tax and depreciation benefits. With the rental returns being strong and no immediate relief in sight for renters, the option to buy a high yielding apartment is becoming a popular choice again.
2. The renter turned buyer – New property buyers are emerging each day, these being professionals, individuals and couples that have in recent years been renters. They are now crossing sides. The ‘tipping point’ is being met for weekly rents vs mortgage repayments and this is motivating great tenants to speak with their broker or banker to get pre-approved. They can buy now while it is affordable, fix their mortgage rate and exit from the rental cycle. No more routine inspections, rental increases or notices to vacate for these guys!

So will this send WA apartment prices northwards and is now the right time to buy? Perhaps, but different properties in different locations will move in line with their individual demand. We are working with sophisticated investors who are buying apartments from our agency anywhere from the $1.5Millon level to the $150,000 level. These buyers understand cycles and have seen the WA market rise, and fall, and rise again as rental prices and buyer demand has changed in past years. A significant factor for these buyers is that there is not a large supply of brand new apartments reaching completion in the coming 6-12 months in comparison with the supply levels that we have enjoyed in years gone by. The rising cost of building, land costs and financing requirements are making feasibility much tighter for apartment developments to make it out of the ground. In addition to this green title properties that can take the interest of many investors have risen significantly in price in recent years. The capital prices have risen however the rental yields for these properties have not increased as greatly as similarly priced inner city apartments, for example.

Experienced investors are not gambling on potential capital growth, rather they are judging a good investment based on income vs expenses, supply vs demand as well as investing in direct property vs investing in other investment classes such as bonds, shares, managed funds or crypto. Opportunity and opportunity cost is more the driver, rather than a roll of the dice at the real estate capital growth table.

The right time to buy is when the buyer is prepared, when they have the need to buy or when they locate the right opportunity. In the apartment market we are seeing some golden opportunities as well more buyers needing and wanting to buy. Buyers needing to purchase a property to live in should be quick as the best opportunities are starting to be snapped up with our days on market having significantly decreased in recent weeks. Perhaps the time has come for WA apartments to have their turn as the asset of choice for buyers. As apartment specialists there is nothing that would make us happier.

Brendon Habak - Selling Principal