SINCE 1997

Perth moving from frozen digits to double digit growth

Perth's western suburbs
4 min read
Perth's prestige western suburbs

Perth moving from frozen digits to double digit growth

For almost a decade, Perth property has been out in the cold. And like a frostbitten climber, it was the extremities that were worst affected.

For almost a decade, Perth property has been out in the cold. And like a frostbitten climber, it was the extremities that were worst affected.

But the blood is circulating again in the figurative fingers and toes of Western Australia’s capital, with the top ten suburbs for price growth in 2020 all on the outlying fringes of the city. 

Suburbs in the lifestyle city of Mandurah in Perth’s far south led the charge (including Wannanup 17.2 per cent and Lakelands 12.2 per cent), while a little further north the industrial heartland of Kwinana, with some of Perth’s lowest median prices, saw values go up by almost 10 per cent. 

Perth property has rapidly moved from the tundra to the tropics, with the market now getting hot and steamy as home opens are swamped with prospective buyers and the rental vacancy rate has plunged to around 0.5 per cent for houses and 1.5 per cent for units.

Perth rent values increased a remarkable 8.2 per cent across all dwellings over the year.

REIWA statistics showed during the December quarter the average time it took for a Perth house to sell dropped to just 21 days, compared to 38 days in 2019.

While the median dwelling value across the city increased just 1.0 per cent in 2020, the past couple of months have shown that 2021 is shaping up as a hot one. 

Speaking to API Magazine, REIWA President Damian Collins said it would be interesting to watch the progress of those outer suburbs that are coming off a low base, while he had expectations the mid-market suburbs near train lines were poised for take-off.

“Places like Mandurah, with it’s boating, crabbing, beaches, and leisure attractions, and others like Two Rocks up north and Swan Valley in the east, have benefited hugely from the work-from-home movement that looks like cementing itself as many people’s preferred way of living, while low interest rates ensure anybody with an income can afford to buy a home on the outskirts when median prices hover around $245,000,” Mr Collins said.

He identified mid-priced corridor suburbs on the northbound train route as the suburbs to watch in 2021.

“Places like Heathridge, Craigie and Kingsley are affordable, close to transport, good schools and the beach, and attracted renters even when vacancy rates were at 7 per cent (in the early 2010s), so they are now attractive to investors and families alike.”

Perth was primed for a surge in investors, he said, comparing the mere $300 million per month being spent by investors at the moment to the $1 billion that investors were spending in 2013 when vacancy rates were markedly higher than today and rent yields lower.

“With the return of expats, long-term low interest rate environment and the obvious allure to investors seeking high rental yields, it’s hard not to see property prices rising six to ten per cent this year, probably towards the upper end of that range,” Mr Collins said.

“Even after that, there’s still room for growth as Perth has come off a 20 per cent decline and is still cheap on a national scale.”

The decline in investor activity has been brought about by many factors over the past few years, including macro-prudential policies, high levels of economic uncertainty and compressed gross rental yields. However, a cyclical rebound in rents is expected to see investors return to all smaller capital city markets in 2021, with Perth at the forefront. 

Top end of town

Research group CoreLogic recently released the Best of the Best 2020 report, which confirmed Perth’s highest priced suburbs were the perennial number one riverside suburb Peppermint Grove, with a median house value of just over $2.4 million, followed by nearby Dalkeith ($2.30m), Cottesloe ($1.92m), City Beach (1.76m) and Nedlands (1.61m). The only suburb south of the Swan River in the top ten was Applecross (10th) at $1.36 million.

The top priced units were in Cottesloe (median price $795,166), North Fremantle, Applecross, Claremont and Mount Pleasant.

A specialist in this market is Jody Fewster, Director and owner of Ray White Cottesloe, who told API Magazine that 10 per cent growth this year was a strong possibility.

“Based on exceptionally strong rental demand, we predict three and four bedroom houses to offer the best capital growth and returns.”

“Suburbs that have experienced significant growth are Cottesloe, with people keen to invest near the coast, and riverside localities of Claremont and Dalkeith. 

Ms Fewster said the resources sector was again driving the change in fortune in the Perth market.

“I am confident in WA's underlying economics – our economy is benefiting from surging iron ore prices and resource exports as China demand, in particular, grows through government stimulus,” Ms Fewster said.  

“Our jobs market is well into recovery and with sales listings at a 13-year low, plus rental vacancies at historic lows of 0.9 per cent, our property market is expected to grow by 10 per cent this year.  

“I suspect consumer confidence may take a hit around March as JobKeeper comes to an end and business administrations and liquidations may rise but I expect this to be short-lived as it’s the underlying economics of supply and demand that will dictate our growth.”

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