One Australian capital city is tipped for record growth by end of 2023
Interstate property investors are turning their attention to a state capital that is tipped to deliver capital gains of up to 7 per cent by the end of 2023.
As a property investor, it always makes sense to set your sights on locations with the most capital growth potential.
And as we know, not all capital city markets in Australia move through the same cycle - meaning there are times when some markets offer more potential than others.
The latest PropTrack Property Market Outlook from REA Group anticipates property price growth of 2-5 per cent nationally by the end of 2023. However, it is unlikely these gains will be shared evenly. Several state capitals are forecast to see property values drop by the end of 2023, as shown in Table 1, below.
When it comes to the highest growth, though, Perth is the frontrunner for PropTrack’s forecast, with capital gains of up to 7 per cent anticipated by the end of 2023. While PropTrack anticipates a number of markets will enter negative territory in 2024, Perth is not among them, with expected price growth of up to 3 per cent next year.
Dwelling price forecasts 2023 and 2024 calendar year
| Forecast for December 2023 | Forecast for December 2024 | |
|---|---|---|
| Sydney | 3% to 6% | -1% to 2% |
| Melbourne | -1% to 2% | 0% to 3% |
| Brisbane | 1% to 4% | -2% to 1% |
| Adelaide | 3% to 6% | 0% to 3% |
| Perth | 4% to 7% | 0% to 3% |
| Hobart | -3% to -6% | -1% to -4% |
| Darwin | -3% to 0% | -1% to 2% |
| Canberra | 0% to 3% | -2% to 1% |
| Combined capital cities | 3% to 6% | 0% to 3% |
| National | 2% to 5% | 0% to 3% |
Source: PropTrack Property Market Outlook August 2023
Affordability an additional Perth drawcard
Perth not only enjoys the highest anticipated growth rates for property values, it is also in the nation’s most affordable state.
PropTrack’s Housing Affordability Report shows that WA ranks well ahead of the other states and territories for housing affordability.
This is not just a reflection of our median home value in Perth, which at $597,000 is almost half Sydney’s median of $1.056 million. The other aspect driving affordability is household incomes in WA, which PropTrack says are “the highest across Australian states”.
We’re already seeing high levels of competition in Perth, especially as rising immigration is causing WA’s population to swell and putting further pressures on demand.
A similar situation is also playing out in the vast majority of Western Australian regional markets.
In Perth, buyers also face the challenge of persistently tight supply. CoreLogic reports that Sydney, Melbourne and Canberra have seen a rise in advertised stock over the past two months, however, this is not the case in Perth, where listings are more than 40 per cent below the five-year average.
In this environment, it is taking just 10 days for homes to sell according to the latest figures from the Real Estate Institute of WA. That means anyone planning to buy property in Perth needs to act fast.
Source: REIWA + Momentum Wealth Research.
How to avoid overpaying in a competitive market
Not surprisingly, investor interest in Perth is not restricted to WA residents alone. We’re seeing investors based in Brisbane, Sydney and Melbourne eager to get a slice of the action.
Unfortunately, we’re also seeing many of these investors fall into the same trap - overpaying for properties beyond their “fair value”, and often sight unseen.
It’s an easy mistake to make in a competitive market, and particularly one you’re not familiar with or can’t easily access. But it’s also an important reminder of the value local experts can offer.
There are several reasons why I believe in the value of “going local” as an interstate buyer:
- Local buyer’s agents understand the inner workings of the market, and know which suburbs offer maximum potential for capital growth, rental yields and tenant appeal. This puts them in a better position to determine the “fair price” for a deal – in turn ensuring you’re not overpaying for a property that will under-deliver on returns.
- You get the benefit of their local contacts on the ground, which can open up opportunities other buyers can’t access such as off-market sales, or advanced property viewings. These benefits can be crucial in giving you a competitive edge when properties are selling fast.
- They can conduct in-person due diligence to help you identify potential problems with the property, or items that may require additional funds to address.
When time is of the essence, these advantages can be key to helping you get into the market sooner to make the most out of capital growth opportunities - and most importantly, in giving you peace of mind you’re making a sound investment decision.
