Perth prices falling but 2027's hotspots are there for the bold

It might bring to mind the idiom about catching falling knives, but even though Perth’s property market is now decelerating at a pace second only to Brisbane’s there are suburbs potentially worth grabbing – even if it means wearing gloves.

Only a few months ago, you couldn’t cut a deal on a Perth property without taking a knife to your pre-conceived budget. That same knife is now in an apparent spiral and few buyers are brave enough to grab it.

The Federal Government’s changes to taxation policy have seen investors retreat from the established homes market. Interstate investors who were buying Perth properties above asking prices sight unseen are now themselves nowhere to be seen.

First home buyers are not stepping in to fill the gap. The strain of poor housing affordability, interest rate increases, and the rising cost of living are keeping many on the sidelines, as they hope that prices will fall further.

Whether they fall that far remains to be seen. The suburbs typically favoured by first home buyers have seen enormous growth over the past few years and any declines have, so far, been comparatively small. 

In October, Perth property prices fell another 1.7 per cent in what has become a national freefall anywhere outside Hobart or Darwin.

I’d point to Perth’s established middle ring in the southeast.

- Farooq Ali, Vested Property Advisory, on the best investment opportunities

If Perth home prices fell 20 per cent drop from their record high it would take the market back to levels recorded in mid-2025. That seemingly unlikely scenario would only require the current pace of decline to continue into late 2027 to become a reality.

With interest rates heading north and the international factors largely responsible for propelling inflation showing no signs of abating any time soon, downward market pressure is likely to be sustained.

The market has rebalanced quickly. Perth houses took a median 25 days to sell in October, compared with eight days a year earlier. REIWA had 8,542 properties listed for sale in the week ending 25 October, against 2,780 in the same week last year.

The fundamentals that had underpinned the market are, however, still there. Western Australia’s economy is strong and the state has the only AAA credit rating in the country. Population growth is the strongest in the nation. The rental vacancy rate has dropped to 1.7 per cent, the lowest level in two years. Nowhere near enough new homes are being built.

These variables should prevent the most serious outcomes coming to fruition but for now buyers remain thin on the ground and listings are rising sharply.

How long will the downturn last?

Farooq Ali, CEO, Vested Property Advisory, expects Perth’s market to remain under pressure in the short term, but believes the current correction is being driven more by interest rates and policy changes than any fundamental weakness in the WA economy.

“In the short term, this is a correction driven by rates and policy, not a breakdown in fundamentals,” Mr Ali told API Magazine.

The Reserve Bank lifted the cash rate to 4.60 per cent on 29 September, its fourth increase this year, while CBA has pushed back its forecast for the first rate cut to August 2027. Mr Ali expects those conditions to keep a lid on the market through the first half of next year.

The medium-term outlook is less certain, with changes to negative gearing and capital gains tax due to take effect from 1 July 2027 for properties acquired on or after 12 May 2026. The Coalition has committed to repealing the changes if elected, with the next federal election due by 2028.

Mr Ali expects the policy settings could eventually shift back towards something closer to the previous system.

“I expect the settings to shift back towards something closer to the old system in some form. If that happens, 2028 to 2032 looks like the rebound window,” he said.

He believes WA is well positioned to benefit from any eventual recovery, particularly if its economic growth continues to broaden beyond the resources that have traditionally driven the state's fortunes.

“Perth has matured a lot since the long lull that followed the last mining boom. WA is one of the wealthiest states in the country. It’s no longer singularly reliant on iron ore, with lithium, nickel, gold, rare earths and LNG all part of the mix,” Mr Ali said.

He acknowledged that the state still lacks the capacity to refine much of what it extracts, largely because of high labour costs, but believes emerging processing technology and Australia’s geopolitical stability offer considerable advantages.

“With Australia’s geopolitical stability, WA is a secure supplier for the world’s largest markets. That's a very different base for the housing market than Perth had a decade ago,” he said.

Chris Hinchliffe, Director Central West, Herron Todd White, told API Magazine that “oversupply is a key theme we are wary of for 2027”.

“We see demand sustaining for well located, affordable properties from buyers with a longer term outlook, especially suburbs where investors have dominated demand for several years, but are no longer active.

“We see the key factor is that as these suburbs remain highly desirable, less stock is likely to come to market and oversupply is therefore less of a threat in that owners likely had a longer term view of their buying decision and there won't be a rush to exit.”

The Perth suburbs to watch in 2027

As with any market, there are myriad performance variations playing across the city.

Units are showing more resilience than houses, according to REIWA data.

After recording 5.3 per cent annual growth between December and March and 5.0 per cent growth from March to June, Perth’s annual median house sale price growth more than halved, dropping to 2.1 per cent between June and September. 

Annual median unit sale price growth also slowed substantially, recording 2.5 per cent growth from June to September after rising 7.5 per cent between December to March and 5.2 per cent from March to June. 

Discerning buyers are fussier than before but still out there.

Mr Hinchcliffe said buying activity is now dominated by buyers that have been trying to get into the market for a long time but were either priced out or intimidated by heated market conditions.

“They are joined by a second demographic that is planning longer term as a way of securing housing in desirable locations for their children in coming years.”

He singled out suburbs such as Como, Glendalough and Scarborough as key areas to watch for in 2027 and into the medium term.

“There is now a clear distinction between desirable properties and those with adverse features, whether that be older dwellings that need work or properties with adverse locational issues,” he added.

“The value gap between these products over the past five years has been narrower than usual, simply due to listings on market being at record lows and buyers not having the benefit of choice.”

According to Mr Ali, the southeast has been Perth’s engine room and even through this correction, the case for well located, land rich stock near transport hasn’t changed.

“The affordable end has led this cycle, and the land component is still what buyers chase.

“Blocks that allow a second dwelling or future subdivision are getting more attention than they did 12 months ago.

“That’s partly because investors are looking at building new to keep access to negative gearing, although construction constraints make that harder than it sounds.”

The transport theme was central to what he viewed as the strongest buying options.

“I’d point to Perth’s established middle ring in the southeast, specifically Gosnells, Kelmscott, Queens Park/Cannington and Carlisle/East Victoria Park.

“They share three things; they sit on the Armadale line, which is getting significant rail investment; they still have a land component, with older homes on larger lots that offer subdivision or granny flat potential; and, they’re also priced below the metro median, which matters more now that borrowing capacity has tightened.”

“I’d be more cautious on outer fringe estate product that ran hardest on first home buyer demand. It has the most exposure if rates stay higher for longer.”

For Perth buyers willing to risk being cut, if they can catch the falling knife at the right time in the right place, they might just be at the sharp end of bargain buy.