According to a Knight Frank residential apartment market report on Adelaide
Terrace for September 2011, strong economic growth, low unemployment,
increased corporate relocations and supply shortages have contributed
towards driving market rentals significantly higher in recent months in East
Perth.
 
Adelaide Terrace is located in Central East Perth and is seen as the
Causeway gateway to the city. It is a mixed-use building environment and has
been traditionally dominated by low-rise office and residential
developments.
 
During the calendar years of 2009 and 2010, 414 apartments were developed on
Adelaide Terrace with only 200 apartments forecast to be completed in the
2011 calendar year.
 
Vacancy rates for apartments in East Perth are the lowest within the Perth
metropolitan market. As a result of this strong demand and short supply,
East Perth is obtaining some of the highest median weekly rental rates.
 
Current rental rates
 
In May/June 2011, studio apartments on Adelaide Terrace were achieving $400
per week. By September 2011, studio rents had increased on average by 25%
to $500 per week within 48 hours of listing.
 
Apartments in the price range of $500 and $750 per week are receiving the
highest level of interest and demand given the shortage of supply in this
specific category.
 
Fully furnished apartments on Adelaide Terrace are commanding a 21% premium
on the average rental weekly rate compared to unfurnished apartments with
average gross rental yields of 6.5% for the former and 5.1% for the latter.
 
Why is demand increasing?
 
Perth is currently experiencing a significant influx of skilled and
professional migrants from the resources sector who represent the middle and
upper management workforce. Generally, the migrant workforce expects to
rent for six months to a year before identifying an area and buying a
property to live in.
 
However, Perth has recently been witnessing demand for longer term tenancies
of more than 12 months compared to the usual six month lease. Immediate
occupancy and a preference to secure properties before arriving in Perth are
two key requirements to ensure tenants have long term accommodation arranged
upon arrival.
 
Inner-city demand for apartments in Perth is forecast to average around
1,200 dwellings per annum, based on the increasing population growth in
Western Australia. Since 2005, there has been a 59% increase in the number
of people living in the City of Perth.
 
Why is supply so tight?
 
The 2008/9 financial crisis has significantly reduced the pipeline of new
inner city apartment projects as some developers have been unable to pursue
major projects due to finance restrictions and a slower pace of pre-sales in
residential projects, which are required by a funding bank before they will
release construction finance. This drop in supply of inner city residential
apartments has resulted in a limited number of newly built apartments now
available for let and this situation is not going to change for at least
another 2-3 years.
 
Outlook
 
Rental rates are likely to increase further in East Perth where the economic
outlook continues to remain positive in terms of employment, foreign
investment, lack of apartment availability and a local economy backed by a
growing resources industry.
 
Neil Kay, Director of Residential Project Marketing at Knight Frank
Australia, said,
 
“It is our opinion that the stock levels of inner city apartments will
decrease significantly due to this lack of supply of newly constructed
apartments and also as more owners selling their property take it off the
market to benefit from the increasing rental returns. The knock on effect is
likely to result in buyers and investors jumping back into the market and
driving capital growth.”
 
Ends
 
To view the full media release please click here
http://easimail.ppr.com.au/ch/12414/2dwghhy/1547787/577c8s448.pdf
 
For further information, please contact:
 
Neil Kay
Director
Knight Frank Australia
Tel: +61 8 9225 2412
neil.kay@au.knightfrank.com
<mailto:neil.kay@au.knightfrank.com>
About Knight Frank
 
Knight Frank LLP is the leading independent global property consultancy.
Headquartered in London, Knight Frank and its New York-based global partner,
Newmark Knight Frank, operate from 207 offices, in 43 countries, across six
continents. More than 6,340 professionals handle in excess of US$886 billion
(£594 billion) worth of commercial, agricultural and residential real estate
annually, advising clients ranging from individual owners and buyers to
major developers, investors and corporate tenants. For further information
about the Company, please visit www.knightfrank.com