REIWA upgrades Perth price growth forecast

Western Australia’s peak real estate industry body has upgraded its house price forecasts for Perth, tipping home values will rise by 15 per cent rather than its previous 10 per cent prediction.

Real Estate Institute of WA president Damian Collins said Perth property had made a strong start to 2021, with prices growing solidly in the first three months to the year.

“CoreLogic’s Perth home value index shows prices have grown five per cent in the first three months of 2021,” Mr Collins said.

“In November 2020 REIWA forecast prices in WA would increase as much as 10 per cent in 2021, however based on what we have seen in the first quarter of 2021, we now anticipate growth of 15 per cent by the end of the year.”

Mr Collins said there were several factors at play that had combined to result in a bullish price growth forecast.

“WA is still the most affordable state in the country when comparing income to median house prices,” he said.

“The current Perth median house sale price is $495,000, which is down from the peak of $550,000 in 2014.

“We hit the bottom of the market around June last year following the COVID-19 lockdown and since then consumer confidence has returned. 

“Buyers who were waiting for the bottom to hit are now eager to get into the market and take advantage of the record low interest rates.”

Mr Collins said the other big factor was a fundamental imbalance between supply and demand, with buyers far outnumbering listings in the current Perth market.

“Buyers must act quickly and in competition with one another to secure a property, which is driving up house prices,” he said.

“When you factor all of these components in, it is a perfect storm for higher-than-expected house price growth this year. 

“We need to get more homes and apartments built. Until we see supply catch up with demand, we will see prices continue to rise.”

The bullish forecast follows a survey by local buyer’s agency and development firm Momentum Wealth, which showed 48 per cent of respondents said WA was their preferred investment location over the next 12 months.

Momentum Wealth general manager Jennifer Wakeman said investor confidence in Perth was up 11 per cent from their previous survey, reflecting the strong price growth recorded in recent months.

“After several years of downturn, WA investors are now seeing sustained growth, and confidence in the long-term prospects of the market is reflected in the high number of local investors who view Perth as the best place to invest,” Ms Wakeman said.

“Western Australia has seen a resurgence in mining activity which, coupled with the state’s effective response to the COVID-19 pandemic, has helped buoy the economy and provided a boost to investor confidence.”

Ms Wakeman said the survey showed investor confidence had fallen significantly in Sydney and Melbourne, which was also driving interest not only in Perth, but also in Brisbane.

“The Sydney and Melbourne markets have recently benefited from high levels of overseas migration, however, this exposed them to greater downside risk when international borders closed, leaving them more vulnerable to an influx in supply compared to markets like Perth where these levels of demand have been much lower,” she said.

“Despite the weakened inner-city markets, both Sydney and Melbourne have weathered the impacts of the pandemic better than many experts predicted, largely as a result of increased owner-occupier activity, especially at the top end of the market. 

“However, investors remain largely absent from these two markets as they turn attention to cities like Perth and Brisbane which are offering much tighter rental markets as well as greater affordability.”