Perth top 10 suburbs eclipse 30 per cent growth, as investors dig deeper for value

Perth’s red hot property market has many feeling as if they’ve missed a generational period of price growth.

East Coast buyers agents are overinflating price tags for eager eastern states buyers, first home buyers desperate to escape the nation’s most stressed rental market are pushing prices at the lower end of the market through the roof, and villas, flats and townhouses are being embraced like never before.

In a rapidly rising market it can be difficult to ascertain true value.

Perth property overall, already the fastest growing market in the country, is forecast to rise at least another 10 per cent this year, on the back of 18.3 per cent growth in the 12 months to the end of February.

Some investors are now asking if the market is still delivering investment potential when competitive buyers are outbidding each other on listed prices by 10 per cent or more.

With that 10 per cent get-in-the-game increment potentially erasing a year’s growth, and stamp duty and other transaction and settlement costs, where does long term value lie?

Supply, a strong economy and population growth remain the key drivers of Perth’s market.

But if global economic and geopolitical factors were to quell the current high levels of demand and persistent global inflation continued to keep interest rates locked in, investors could feasibly be looking at lengthier times to recoup their investment.

Top 10 unit and house suburbs for price growth

Whether its location, price range or property type, there are sectors of the market that are in greater demand than others and with resilient prospects going forward.

Most of the action is in the upper and lower portions of the market in terms of price, with outer suburban houses in the $400,000 to $550,000 price range experiencing annual price growth of more than 25 per cent, while suburbs in the $1.1 million to $1.4 million range are moving at that same rate of knots.

TOP SUBURBS BY ANNUAL CHANGE IN MEDIAN HOUSE PRICE

Price growth in the year to February 2024 (28 or more annual sales; <1HA) Source: REIWA.

Buyers who still want some land are driving strong demand for villas.

REIWA data released Tuesday (12 March) showed that within the broader unit market, villas, flats and townhouses are the top performers.

CEO Cath Hart said the overall median sale price for units was rising, but growth wasn’t uniform across the various segments of the unit market.  

“When we break down the figures we can see the segments that have the most growth, which reflects buyer demand,” she said.  

“Villas were the top performers for price growth, closely followed by flats and then townhouses.  

“This is understandable, buyers generally prefer houses – we all like our own patch of land - however competition for houses is high.  

TOP SUBURBS BY ANNUAL CHANGE IN MEDIAN UNIT PRICE

Price growth in the year to February 2024 (28 or more annual sales; <1HA) Source: REIWA.

Villas and townhouses are fairly similar to houses. They may not be set on their own block, but they often come with some land, usually in the form of private courtyards, and the low-maintenance aspect also appeals to buyers.

“There is often talk about density in Perth and these stats show buyers are quite willing to embrace medium density living, we just need to build more of these types of homes and in locations where buyers want to live,” Ms Hart said.

The growth in the median sale price for flats reflected their affordability.

“Flats are often a great way for first home buyers to enter the market,” she said.

“They also offer good value for investors.” 

Units are now selling 13 days faster than they did a year ago.

The growing demand for units is seeing prices start to rise at a greater rate. The median unit sale price increased 1.2 per cent in January and was 3.8 per cent higher year-on-year.

The median house sale price rose 0.8 per cent to $605,000 over the month. This was 10 per cent higher than February 2023.

Perth’s hotspots that could outperform market

Perth owner occupiers have an appetite for landed property, more so than owner occupiers on the East Coast who have become accustomed to unit living just to be closer to the city centres.

Julie Kelley, Global Sales and Marketing Manager for aussieproperty.com, said a trend was emerging of buyers compromising to be within 10 kilometres of the CBD and shifting their search to townhouses, villas and apartments.

For investors this can be favourable as there is often less maintenance, higher rental yields and lower vacancy rates, in addition to a lower purchase price and reduced stamp duty.

In Burswood, for example in the The Crest development, and Como, buyers can purchase a two-bed, two-bath, two-car apartment in a complex with resort-style facilities in the $660,000-$770,000 bracket.

When it comes to houses, Ms Kelley said many buyers with a budget of $1 million or less and wanting a large four-bed, two-bath, two-car family home on a good-sized block are expanding their searches to beyond 20 kilometres of the CBD.

Suburbs south of the city’s famous Swan River divide were attracting strong investor interest.

“Suburbs such as Canning Vale, Harrisdale and Piara Waters, Treeby and Hammond Park south of Perth are popular,” Ms Kelley said.

“They are well established suburbs, with good amenities and schools, lovely parks and a great sense of community.

“The houses in these suburbs were typically built as house and land packages in well-designed leafy estates from the 1990s into the 2020s, with land releases and new builds continuing even now.”

Buyers with similar budgets and goals looking for homes north of the river and content to settle outside a 20 kilometre range from the CBD, were making houses in suburbs such as Hamersley, Greenwood, Kingsley and Darch highly sought after assets.

Supply crunch to linger despite government efforts

Driving the Perth market is an unprecedented housing shortage, with supply and demand disparities at historic levels.

In response, the Western Australian government has launched initiatives such as the Builders’ Support Facility (BSF), applications for which opened on Monday (11 March), to help boost supply.

Western Australia’s population increased 3.1 per cent in the year leading up to June 2023, the highest growth rate nationwide.

Peter Gavalas, a buyer's agent from Resolve Property Solutions, said this has far outstripped housing supply, which has been plagued with low completions and dwindling approvals.

“Initiatives like the BSF facility are a positive step but don’t fully address the underlying issues affecting Perth’s housing supply, and as a result Perth’s property prices and rents are likely to continue rising, adding yet more pressure on potential homebuyers and tenants.

“Perth’s property market is in dire straits.”

According to recent REIWA data, the number of listings for sale across Perth plummeted to a record low of 3,648 at the end of December, marking a 23.4 per cent drop from November and a staggering 49.0 per cent decline compared to December 2022.

“The gap between the number of homes available and the number of people wanting them has never been wider, fuelling intense competition among buyers and driving up prices,” Mr Gavalas said.

“Meanwhile, homes are flying off the market, with houses selling in just 10 days on average.”