Collapse of Fortress WA a boon for property prices

With fortress WA being dismantled and new residents and migrants flocking to the state, the impact on an already buoyant property market is set to escalate.

While Sydney and Melbourne markets stall, the residential property market in Perth is facing severe affordability challenges and an extremely tight rental market throughout Western Australia. The city’s vacancy rate has dropped to its lowest since December 2011.

According to the newly released OpenCorp Australian Property Market Insights for the first three months of 2022, the reopening of the WA border will further increase property demand, leading to higher rents and median house values increasing.

Over the last week, SQM Research data shows that asking prices for houses in Perth rose by 5.7 per cent and apartments 0.2 per cent.

It’s a blow for potential homebuyers who may have been hoping for the WA property market to stabilise this year and finally secure their first home but a welcome bit of news for property investors who bought over the course of an otherwise slow decade for Perth property.  

Steve Lay, Director of Lay2 Real Estate, said 2022 would bring further price growth to the WA market.

 “I can’t see prices slowing down, with demand continuing to rise with the hard border being opened.”

The affordability and supply issue facing WA and the rest of the nation was highlighted recently in the National Housing Finance and Investment Corporation’s State of the Nation report 2021-22.

The NHFIC report put a spotlight on the acute need for government to create a national plan to assist with the affordability and supply issue affecting the nation.

WA is now the second most affordable place in the country to buy in, according to the latest Real Estate Institute of Australia Housing Affordability Report that also found the state to be the most affordable capital in the country in which to rent.

No vacancies

So far this quarter, REIWA data shows that asking rents increased by 7.4 per cent for all dwellings, while units also increased by 2.3 per cent.

For a balanced rental market, vacancy rates for rentals should be sitting between 2.5 and 3.5 per cent, a far cry from the current vacancy rate in the state.

A positive note for renters is that median rent prices stabilised in February compared to January, to be sitting at $450 per week.

The suburbs that recorded the biggest increase in median rent during February were Yokine (up $15 to $475 per week), Rockingham (up $10 to $390 per week), Scarborough (up $15 to $595 per week), Ellenbrook (up $10 to $420 per week) and Yanchep (up $10 to $450 per week).

The fastest median leasing times were Yanchep (12 days), Alkimos (13 days), Meadow Springs (13 days), Yokine (13 days) and Byford (14 days).

Investors relieved

The Perth property market continues to play into the hands of sellers.

Louis Christopher, Managing Director of SQM Research said the upward surge in listings over February suggests some sellers are taking profits after “phenomenal price rises” were posted in 2021.

“We could see the upward trend in listings continue through the first half of the year as more sellers seek to take profits.”

The same sentiment was shared by Dr Nicola Powell, the Chief of Research and Economics for Domain.

“Perth remains a sellers’ market, which is helping to entice more homeowners reacting to rising prices and putting their homes up for sale.

“While it is still a competitive market for home hunters, rising supply and easing demand trends should support more realistic seller prices and greater buyer choice.”

REIWA data shows that the fastest-selling suburbs were Tapping, Coolbellup, Cooloongup, Greenwood and Harrisdale. All suburbs averaged a sell time of just seven days or less.

REIWA February data shows Perth’s median house sale price was $525,000 and $415,000 for apartments. The data also shows the average number of days taken to sell is sixteen days, the lowest it’s been in four years.

Perth homeowners have been the most responsive to increased selling prices, with SQM research showing that over the last 12 months, Perth comfortably had the highest property listing increases at 18.1 per cent, ahead of Sydney at 8.9 per cent.

Supply constraints

After a strong uptake of new builds in previous years due to government incentives, ABS data shows that Western Australians are less interested in building, with a continuing decrease in building approvals.

OpenCorp said that despite the government stimulus incentives offered in the past 12 months, dwelling commencements for new dwellings declined for the quarter, highlighting the effects of a delayed border opening and worsening material and trade shortages.

These constraints are likely to prolong the effects of the boom and delay any increase in supply.

The impact of trade shortages is being felt throughout the state.

NHFIC said supply constraints, combined with high demand for construction, has seen prices soar for materials such as timber, aluminium and steel by 20 to 34 per cent over the last 12 months.

Mr Lay at Lay2 Real Estate has seen first-hand the impact of material and staff shortages throughout the state, telling Australian Property Investment Magazine there are understaffed projects all over WA due to border closures.

“A range of businesses are now requiring their employees to live in WA to work to avoid being locked out of the state if border closures happen again."

It is a requirement that will only contribute to WA’s worsening housing supply.

Despite increasing house prices, Perth remains the most affordable capital city in the country.

REIWA President Damian Collins said West Australians could still achieve the dream of home ownership.

“In Sydney and Melbourne, their median house sale prices sit above $1 million, pushing the goal of home ownership out of reach for many people, so we are lucky that owning your own home is still attainable for most people in Perth.”

But potential homebuyers waiting for the market to stabilise this year could be left disappointed.

“REIWA members across Perth are reporting strong market conditions and we don’t anticipate the demand for property changing any time soon,” Mr Collins said.

“The Perth property market is on track for another solid year of price growth.”

What a difference two decades makes

REIWA research released Wednesday (9 March) revealed the overall Perth market had seen house prices grow 209 per cent during the last two decades.

Willetton, Medina and Pinjarra top the list of Perth suburbs that have seen the biggest percentage increase in median house sale price over the last 20 years. 

“The median house sale price in Perth has grown from $170,000 to $525,000 since 2001, which is modest growth in comparison to other major cities like Sydney and Melbourne that have seen much steeper price increases,” Mr Collins said.

Of the 20 suburbs on the list, 17 recorded 300 per cent or more growth to their median house sale price in the last two decades. 
Nine of the 20 suburbs on this list had median house sale prices above $1 million in 2021.

Seven were priced within $500,000 - $900,000, while four had median house sale prices below $400,000.