Perth homes, land and rent all slipping further out of reach
For anyone seeking a home in Perth it's difficult to know where to turn, as property prices, land packages and rents all climb - but borrowers are somehow still taking the plunge in greater numbers.
Perth house, rent and land affordability has taken a pummelling in the past two years, and newly released data reveals it is losing its competitive allure compared to other Australian capitals.
The price of new land soared 34 per cent in 2024, ending its reign as the most affordable capital city in Australia, according to UDIA’s annual State of the Land Report released Tuesday (18 March).
The new land price for Perth now sits at $329,000 with Adelaide now the most affordable capital with a median lot price of $307,000.
The price leap in a city with one of the world’s lowest population densities is being hampered by the lack of uptake of new units.
The report showed that annual new unit sales were down 12 per cent in Perth in 2024.
CoreLogic research shows Perth’s population density is just 360 people per square kilometre, lagging significantly behind Melbourne (521), Adelaide (444) and Sydney (441). More than 85 per cent of Perth’s housing stock comprises detached homes – the highest proportion among Australian capital cities.
The National Housing Accord, which is seriously lagging behind in its stated goal of addressing the housing supply shortage, is faring worse in Western Australia than elsewhere.
Tanya Steinbeck, CEO, UDIA WA, said the significant increase in new land prices can be attributed to the ongoing housing supply shortage that is impacting the residential property market in WA.
“We have seen demand for housing in WA continue to escalate as our population increases, economic conditions remain strong and unemployment is low.
“Rental vacancy rates also remain extremely tight and rental costs continue to remain at record highs.
“In response to the ongoing strength in demand for new housing, greenfield developers have put their foot on the accelerator, ramping up supply where possible,” Ms Steinbeck said.
Housing affordability has also declined appreciably as property prices have soared in the state.
While it remains the most affordable state, with only the ACT and Northern Territory being more affordable, its quarterly decline was the worst of any jurisdiction in the country.
The REIWA Housing Affordability Report, also released Tuesday, showed the proportion of family income required to meet loan repayments in Western Australia increased 2.5 percentage points over the quarter to 42.5 per cent.
Cath Hart, CEO, REIWA, said affordability continued to be impacted by strong property price growth, which has seen the size of loans increase.
“The Perth median house sale price increased 23.3 per cent in the year to December 2024 and the regions have also seen strong growth, and as a result, larger mortgages are needed to purchase property,” Ms Hart said.
The report shows the average loan size in WA rose 7.3 per cent over the quarter and nearly 20 per cent over the year to $598,771, which has seen monthly loan repayments rise.
“There may be a slight reprieve in the next quarter following the RBA’s rate cut in February.
“For every 0.25 per cent cut in interest rates, the proportion of family income required to service the average loan usually drops by around 1 percentage point, but this will of course be moderated by any property price growth over the quarter.”
Across the country, housing affordability declined in every state and territory in the December quarter.
Borrowers undeterred by price hikes
Perth had the third-highest rate of profit-making sales across the capital city markets at 97.4 per cent in the quarter but, despite the inexorable rise of property prices, home owners are still piling into the market.
While the pace or price growth is unquestionably abating, the number of loans to owner-occupiers still increased in the December quarter. The total number of loans to owner-occupiers in WA increased 5.7 per cent over the quarter to 10,659.
“While buyers were still active, our members report rising prices mean they are more mindful of their budgets and are making considered purchasing decisions,” Ms Hart said.
WA’s relative affordability owes much to its relatively high income levels, rather than inexpensive property. The median weekly family income in WA ($2,675) was higher than the national median ($2,528) and the second highest in the nation.
First home buyer activity also increased over the quarter.
The number of loans to first home buyers rose 3.6 per cent over the quarter to 3,852, however this was 9.9 per cent lower than a year ago.
“Despite declining affordability, first home buyers remain very active in the market, making up 36.1 per cent of owner-occupier loans,” Ms Hart said.
Nationally, WA remained in the middle of the pack for rental affordability. The Northern Territory (24.3 per cent) was equal to WA, while Queensland (23 per cent), Victoria (21.5 per cent) and the ACT (19.2 per cent) were more affordable.
New South Wales remained the least affordable state for tenants, with 28 per cent of family income required to meet rent repayments.
Lack of density hurting housing goals
Perth’s urban footprint now covers about 6,000 square kilometres, with the metropolitan area expanding significantly over the past two decades as population grew by a whopping 54.4 per cent.
According to the UDIA report, a cumulative five-year delivery of around 79,000 new homes will be about 117,000 dwellings short of the Accord target for Perth.
“While developers have ramped up activity over the last couple of years, WA is still falling well short of the National Housing Accord targets set by the Federal Government,” Ms Steinbeck said.
“While the new land market has been able to ramp up in the last couple of years, it is becoming more complex to bring large swathes of developable land to the market across the Perth Metro region,” Ms Steinbeck said.
“Lack of enabling infrastructure and environmental constraints are the top barriers to getting more new land to market.
“We need to make sure we are taking a balanced approach to housing delivery that supports greenfield development where appropriate, as well as delivering more medium and higher density housing options.”
So far, that densification is not happening at sufficient pace. Perth reached near record lows for multi-unit sales during 2024.
“New unit approvals are up, which is promising, but we need to focus on making these types of projects more financially viable so that those approvals are converted to housing on the ground,” Ms Steinbeck said.
