Perth hotspots soar 30 per cent but will the buying frenzy continue into 2024?

Homes in some Perth suburbs have shot up by more than 30 per cent as the frenzy for units and houses in the West Australian capital continues unabated.

High demand has collided with tight stock supply and the result is significantly boosted property prices.

As affordability issues start to bite, it is the unit market that has exceeded house price rises by almost 5 per cent throughout 2023.

Real Estate Institute of Western Australia (REIWA) data shows sale price growth for units in West Leederville, which has a median price of $499,500, grew the most over the year (to the end of November) by 31.3 per cent.

The suburb with the highest sale price growth for Perth houses was North Fremantle, where house price growth was 26.7 per cent resulting in a median price of $1.6 million.

Cath Hart, CEO, REIWA told API Magazine houses are selling in near-record times and the expectation is that prices will continue to rise this year.

“Demand for homes remains strong, underpinned by strong population growth, while the challenges in the rental market and constraints in the building industry also drive people to the established homes market,” she said.

Nathan Hewitt, Director, Yard Property, says opportunity for capital growth is high in Perth and he’s seen a lot of east coast investors buying into the market, though suburbs like North Fremantle are relatively undiscovered though popular with locals.

“North Fremantle is significantly cheaper than nearby Cottesloe, Mosman Park, Dalkeith, Swanbourne, hence you’re getting a lot of people from the western suburbs or the southern suburbs aspiring to get into that location as it’s got really good school catchments and is really the only suburb located between the ocean and the river and has beautiful heritage and character about it, with modern homes as well,” he said.

Other suburbs with high growth in December included Kallaroo (up 10.5 per cent to $1,071,500), Camillo (up 4.4 per cent to $399,750), Mandurah (up 2.4 per cent to $384,000), East Fremantle (up 2.3 per cent to $1,672,500) and Southern River (up 2.2 per cent to $700,000).

Using different methodology to REIWA, CoreLogic’s January National Home Value Index found Perth’s increase in house values were up 15.2 per cent, compared to a national increase of 8.1 per cent, which on average equates to 1 per cent growth per month since May.

Similar growth has been seen in Adelaide and Brisbane to the end of the year, but Sydney’s growth rate stalled at just 0.2 per cent.

Tim Reardon, Chief Economist, Housing Industry Association (HIA) cites recent HIA survey data, which shows an uptick on new home sales in WA of 49.1 per cent in the three months to November 2023, compared to Queensland which also grew 6.3 per cent, against falls in South Australia (by 26.1 per cent), Victoria (14.2 per cent) and NSW (9.4 per cent).

Perth houses sold quickly in December in a median of 10 days, nine days faster than a year ago, with the fastest suburbs being Lakelands (two days); Cooloongup and Banksia Grove (three days); Dayton, Butler, High Wycombe, and Woodvale (four days); and Rockingham, Camillo and Palmyra (five days).

“After hitting record lows in October and November, time on the market did increase marginally in December, however, that’s to be expected at this time of year as there is usually a strong flurry of activity earlier in December and then things slow down over the Christmas period and while homes still sell over the festive season, it generally takes a little longer,” Ms Hart said.

Listings languishing

REIWA data also shows listings fell to a record low of 3,648 at the end of December, which was 23 per cent lower than November and 49 per cent lower than December 2022.

Mr Hewitt said the equilibrium of the Perth metro market is at 12,000 homes and in his 30 years in the industry, he’s never seen it go under 7,000.

“That’s a massive supply shortage we’re experiencing at the moment, the biggest I’ve ever seen by a long way plus land is very scarce, there are very few blocks available, building costs are high which puts pressure back on existing homes and the time to build is long as well, so the building side of things is not easy at the moment,” he said.

On 4 January, however, the Cook Government announced a $10 million interest-free loan facility to help residential builders complete unfinished properties capped at $300,000 per project, yet just 33 homes will be completed under the scheme if applicants seek and receive the maximum amount.

WA recorded a 3.1 per cent increase in its population in the year to June, the strongest growth rate in the country, according to the Australian Bureau of Statistics.

That saw the population grow by nearly 87,000 people, with immigration and natural increases.

“That’s about 35,000 additional households in 12 months, if you assume there are 2.5 people per household,” Ms Hart said on Tuesday (16 January).

“However, in the same timeframe about 14,000 new homes were completed. That’s a shortfall of over 20,000 dwellings, which is putting incredible pressure on the established homes market and driving up prices.

“More population growth is expected over the next year, with the State Government revising its forecast population growth of 1.7 per cent for 2023-24 to 2.4 per cent in its mid-year budget review.”

Inner suburban units take off

West Leederville’s 31.3 per cent unit sale price increase can be explained by the suburb’s combination of family homes and units and its proximity to a cross section of many hospitals is attracting a lot of medical professionals, says Craig Gasper, Property Consultant, DUET Property Group.

“The family homes range from the low $1 million through to the high $2 million and an entry level unit at the $500,000 mark gives you all the amenities the community enjoys, at a fraction of the cost.

“Some of the developments through West Leederville are really well finished, with one-, two- and three-bedroom options. A three-bedroom unit gives a young family the opportunity to enter the renowned school zones West Leederville offers at a price, while still being a short drive to the CBD,” he said.

On average, once listed, units are selling within seven to 10 days in the suburb as stock is the low and Mr Gasper says the apartment market is much more saturated than the family home market now.

“Quite often, a buyer will view an apartment and have five or six similar opportunities and there are also many new developments going up, so some buyers may prefer to go to the newer side of things.

“With stock levels being so low, supply and demand laws suggest there will still be growth in the unit market, and if the unit itself has a defining feature, a point of difference – such as electric charging or views over lakes/parks, this will prove desirable among the buyer pool.”

Ms Hart said REIWA members are reporting a strong motivation to exit the challenging rental market, which is resulting in greater demand for units, which are almost $200,000 cheaper than houses.”

Migration to boost rental demand

Perth’s median dwelling rent remained stable at $600 per week in December, which was 15.4 per cent higher than the same time last year.

Suburbs that saw the most growth in their median weekly rent price in November were Nedlands (up 29 per cent to $900), Wembley (up 27 per cent to $635), Applecross (up 21 per cent to $700), Mosman Park (up 20 per cent to $750), and Kewdale (up 20 per cent to $600).

Suburbs recording the fastest median leasing times were Erskine (five days); Langford, Byford, and Doubleview (nine days); and Cannington, Duncraig, Alkimos, Beckenham, East Cannington and Joondanna (10 days).

Population growth is unquestionably putting pressure on the tight rental market, with new data from the ABS showing WA’s 3.1 per cent growth rate to be the fastest of all Australian states.

Professor Amanda Davies, School of Social Sciences Head, University of Western Australia told API Magazine that housing market supply has not kept up with population growth.

“Western Australia’s rapid population growth is a consequence of higher than anticipated net internal migration and higher than anticipated international migration, and for the past two years WA has added between 2,500-3,500 residents each quarter through interstate migration.

“Mid-year last year, WA also added 61,500 international migrants, which before Covid was about 25,000 per year, so that’s a pretty significant change.

“With WA’s strong economy and the high costs of living and housing in east coast states, I anticipate that situation will remain the same for 2024, with Perth a magnet for new residents.”

Interstate investors urged to be wary

ABS figures released last week show the Perth property investment market has hit a new high, with property investment lending in Western Australia topping $901 million during November 2023 – the highest monthly figure since December 2014.

Independent investment group, Property Club, has warned interstate investors to beware of the risk of getting financially burnt if they rush into the red-hot Perth real estate market without doing enough research.

Kevin Young, President of Property Club, said it had issued a red alert to interstate investors who are now buying Perth properties in an unprecedented frenzy.

“The Perth property market is now becoming too hot and interstate buyers and marketeers are now paying ridiculous prices for Perth properties after engaging in bidding wars against each other.

“While the Perth property market is predicted to record price rises this year due to this buying frenzy, Property Club does predict a market correction in Perth property market down the track where only quality located properties will perform strongly over the long term,” Mr Young said.

Perth house prices are set to grow 10 per cent in 2024, according to REIWA’s 2024 property market quarterly update, released on Tuesday.
Rents are also expected to rise, although the rate of growth may slow.

“After a slow start, house sale price growth accelerated over the year, recording 2.6 per cent growth in the December quarter and 8.3 per cent over the year to reach a median of $590,000,” Ms Hart said.

“This is a new record for Perth house prices. While it is 24.2 per cent higher than the low of $475,000 recorded in 2020, it is only $45,000 or 8.3 percent higher than the previous peak of $545,000 reached in 2014.”

The median unit sale price was stagnant for many months across 2023 but started to increase at the end of the year, rising 2.0 per cent over the December quarter and 0.7 per cent over the year to a median of $408,000.

“We can expect more increases in the median unit price in 2024,” Ms Hart said.