Population growth to keep powering Perth property prices upwards

Demand for housing will continue to outstrip supply in Western Australia as new data showed the highest rate of annual population growth since 2009.

WA’s population grew 3.3 per cent to 2.905 million in the year to September 2023, according to Australian Bureau of Statistics (ABS) data.

This equated to 93,591 more people, or around 37,000 extra households over the 12-month period.

The largest contributing factor to the state’s growth remains net overseas migration at 74.4 per cent, followed by natural change (births and deaths) at 17.6 per cent and net interstate migration of 9.1 per cent.

WA’s population remains the fastest growing in the country, and there are few signs of this easing with the government adjusting its forecasts upwards. This will maintain pressure on WA’s sales and rental markets.

We can expect to see house prices and rents continue to rise, homes to sell and lease quickly, and the rental vacancy rate to remain low for some time yet.

The latest population data released coincided with the WA unemployment rate dropping from 4.3 per cent in January 2024 to 3.6 per cent in February.

This underlines the strong economic fundamentals that are part of the attraction for people moving to WA.

Over the three months to September 2023, WA’s population rose 0.9 per cent.

Less than one per cent might sound small but this equates to 24,695 more people or 9,878 additional households.

This is a near record high for quarterly change, with the current record set in the July 2023 quarter (one per cent).

Net overseas migration was the largest contributor to the quarterly growth at 73.4 per cent, followed by 17.6 per cent natural change and 9.1 per cent net interstate migration.

Nationally, the population grew by 2.5 per cent in 12 months.

Building completions not keeping pace with household growth 

The strong population growth will maintain pressure on the building industry.

Many interstate and international arrivals opt to rent when they first move to the state while finding their feet, but Perth has one of the tightest rental markets in the country.

Delays and setbacks in the construction industry have led to people renting for longer while they wait to move into their new homes. Once there is a sustained higher level of building completions the rental market should start to ease – but this will be a while yet.

Traditionally we see building approvals and completions mirror one another, with a slight lag. However, the gap has been increasing in recent years.

The above graph shows the uptake of building incentives during the pandemic, including Home Builder and the Building Bonus. We can see a huge spike in the number of approvals while completions remained flat.

Completions increased in the third quarter of last year and were at the highest point since 2017, as the population keeps growing at near-record rates.

Over the September quarter, there were 4,830 public and private dwellings completed in WA, a shortfall of about 5,000 dwellings to meet estimated new demand for households.

In the year to September 2023 there were nearly 17,000 private and public dwellings completed, compared to the 37,000 new households that moved to WA in the same timeframe. That’s a shortfall of about 20,000 new homes.

WA's population growth to remain strong

Population growth is expected to remain strong, with the State Government revising its forecast at the end of last year to 2.4 per cent for 2023-24, up from the 1.7 per cent announced at Budget time. The state is likely to exceed even the Government’s revised forecast of 2.4 per cent.

Population growth of 1.7 per cent is forecast for 2024-25.

The strong population growth will maintain demand for housing in the sales and rental markets.

WA is an appealing destination because of its resilient labour market, high wages and also because it is still among the most affordable places for housing in Australia.