Perth real estate continues climb in face of obstacles
Relative affordability, lack of supply and increased migration are expected to continue pushing Perth property prices higher in the face of rising interest rates and falling prices elsewhere.
Interest rate hikes are finally stemming the tide of property growth in Australian capital cities but Perth remains one of the few to be bucking the trend.
The West Australian capital sits with Brisbane and Adelaide as the exceptions, where the quarterly growth trend lifted in May, although both regions remain below the peak quarterly rate of growth.
Over the last month, the combined asking prices for apartments and houses combined have decreased by 0.4 per cent nationally, however, Perth defied the market trend, with prices increasing by 0.6 per cent for the month and 3.6 per cent in 2022.
Sydney and Melbourne house prices are tanking, down 1.1 per cent and 0.8 per cent respectively so far in June, which has dragged values at the five-city level down 0.60 per cent.
Reiwa.com data revealed 64 suburbs recorded median house sale price growth last month.
Industry experts, including Alan Bourke, a Principal with Bourke’s Property, believe the demand for properties in Perth won’t be going away anytime soon.
“Demand remains strong in Western Australia despite recent rate changes and price growth will likely stabilise and go sideways for 12 months,” he said.
“The number of properties on the market is still relatively low at 8,450 rather than the 11,000 needed to meet demand.”
“We believe the market will be strong again next year due to the large government surplus, strong business confidence and supply chain issues delaying supply.”
REIWA President Damian Collins said market conditions across Perth were strong, which was reflected in the very fast median selling times.
The eight suburbs selling in eight or fewer days
|Suburb||Median selling days||12-month change (days)||Median house sale price||12-month change (%)|
The overall Perth market median selling time for the 2021-22 financial year was 15 days.
“In a balanced market, median selling times sit between 30 and 40 days, so for these suburbs to be posting single-digit median selling times is a testament to the strength of the WA market and the high level of buyer demand being experienced across the state,” Mr Collins said.
Migration the engine
Despite the price hikes throughout the state, Catherine Doherty a Property Mentor and Branch Manager with Property Club, told Australian Property Investor Magazine that she believes Perth property prices are still undervalued.
“Perth property prices are the lowest of all the capital cities and are undervalued compared to the rest of the country,” she said.
“Regardless of historically low but now rising interest rates, Perth properties remain a very good investment with cash-positive returns that will offset rising rates.”
A similar sentiment was shared by Paul Niardone, Executive Director of The Agency Group.
“Perth didn’t experience the spike in valuations like the major cities on the eastern seaboard,” he said.
“Instead, we experienced moderate to steady growth following the drop-off from the boom.
“Given wages and mortgage sizes, Perth is still very affordable but the trump card for WA is the intake of workers required.
“As the borders start to open this will increase demand.”
Data released by the Real Estate Institute of Western Australia (REIWA) shows the suburbs that have seen the biggest increase in median sale prices in May were North Perth, up 4.5 per cent to $1.1 million, Wembley Downs (up 2.7 per cent to $1.31 million), Langford (up 2.6 per cent to $380,000), Wilson (up 2.5 per cent to $610,000) and Bedford (up 2.3 per cent to $750,000).
REIWA’s President Damien Collins said the growth in Perth’s property market is a positive sign that the recent increase to the cash rate hasn’t reduced demand.
“Based on what we’ve seen so far this year, Perth is on track to achieve REIWA’s forecasted 10 per cent price growth by the end of the year.”
Perth’s residential luxury property market is also likely to come out unscathed from the interest rate hikes according to Mack Hall, Principal with Mack Hall Real Estate.
“We expect that the interest rate hikes will have a modest impact on Perth luxury properties,” he told API Magazine.
“Our property market has not experienced the frenzy experienced in the Sydney and Melbourne markets over the last 10 years, which will no doubt have a buyer correction.”
“Perth still has the second-lowest median house price in Australia.”
Houses are worth the investment
Houses are the money-marker compared to apartments when it comes to price growth, according to Mr Bourke.
“The price growth has been in houses and very little in apartments,” he said.
“Often we aggregate the market and say it has gone up by 5 per cent, but invariably the apartment market has had very little growth and the houses have had the growth.”
“A recent small survey showed that apartments have gone up by 0.4 per cent annually over 10 years, so not great growth.”
“This has resulted in many investors selling these assets and purchasing houses.”
Property Club’s Ms Doherty said there were some key factors contributing to the ongoing growth and high demand for properties throughout Perth.
“The low unemployment and the jobs available will mean national and international migration into the state,” she said.
“Young families looking for a chance to buy an affordable home and live near the beach will also create demand.”
“Interstate investors are already buying, as the entry point is low and the returns are high.”
I would say go now, for both buyers and sellers, while the market is stable.
- Paul Niardone, Executive Director of The Agency Group
“The pressure on the building industry means they cannot build houses fast enough to meet the demand.”
“Vacancy rates are extremely low, under 1 per cent across the city and from Yanchep right down to Mandurah.”
“All of these factors contribute to the prediction that property prices will rise.”
Mr Bourke said aspiring buyers may need to wait two years if they want to buy when the market is more stable.
“I believe they will need to wait two years and a lot can happen in that time,” he said.
“Prices will stay stable in houses and may soften slightly in units due to a slight increase in supply.”
“Buyers could wait a while for a unit purchase but it’s better to buy one at a good price and move in.”
“Rents will start to go up again as buyers who can’t repurchase move back into rental accommodation.”
While Perth remains a seller's market according to Mr Niardone, he believes aspiring buyers shouldn’t hold off on purchasing their home.
“While the number of transactions and listings are starting to slow down, Perth remains a seller’s market and the impact of another couple of interest rate rises will still be countered by the relative affordability of the WA market and the strong WA economy that includes the lowest unemployment levels in the nation,” he said.
“However, these are complex times in which international factors can have major repercussions if they eventuate, so at the moment every economist’s crystal ball has a slightly different view.”
“I would say go now, for both buyers and sellers, while the market is stable and as long as no international factors have an effect, as I don’t see the WA market valuations changing markedly either way.”
“With borders opening up, it's becoming easier for people to get work visas, which will add further pressure to existing stock.”
For those lucky enough to be considering Perth’s luxury property market for their next home, Mr Hall shared his insights.
“This very small shire has the Swan River on its eastern boundary and is only 10-minutes to Cottesloe Beach.”
“The large blocks with beautiful homes look good value compared with land prices of the neighbours.”