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Why investors are flocking to Perth property

Apartments and the city skyline of Perth, Western Australia
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Perth’s affordability makes the city a viable option for investors across a range of budgets and price points. Photo: Shutterstock

Why investors are flocking to Perth property

Perth’s property market has made a resounding comeback over the last two years and experts are predicting there’s plenty of fuel in the tank to deliver further gains in 2022.

Affordability, impressive returns and a robust economy are putting Perth firmly in investors’ sights in 2022.

Perth’s property market has made a resounding comeback over the last two years. Data from independent research firm, CoreLogic, reveals values have climbed over 22% since November 2019. And experts are predicting there’s plenty of fuel in the tank to deliver further gains in 2022.

Already, data from the Real Estate Institute of WA (REIWA) shows stock levels remain tight across the Perth market. Listings are half what they were three years ago, and Jennifer Wakeman, General Manager of Perth-based property advisory, Momentum Wealth, says, “More people arriving in WA when borders re-open will add to housing demand and keep listings below historical averages."

REIWA forecasts show Perth values are expected to rise 10% in 2022 alone. Ms Wakeman explains, “Perth values are still below the June 2014 peak, so there is plenty of upside for investors who get into the market early.”

However, she believes the potential for capital growth isn’t the only reason Perth is set to shine in 2022.

Perth’s affordability trumps east coast markets

As property values soar across Australia’s east coast, Perth continues to be a haven of affordability.

“Perth’s median home value is currently $528,551 according to CoreLogic,” says Ms Wakeman. “That’s well below Sydney’s median of $1,098,412, or $795,108 in Melbourne. This pricing difference is giving investors in Perth a lot more bang for their buck.

“To put this affordability into perspective, values in the Perth suburb of Daglish, a blue-chip location just 4 kilometres from the CBD, rose by 50.3% in 2021. Yet the median house value is just over $1.3 million. For that sort of money, investors in Sydney would be lucky to buy in a middle ring suburb.

“Perth’s affordability also makes the city a viable option for investors across a range of budgets and price points. Importantly, it provides opportunities for investors targeting capital growth to buy properties with a higher land component. That matters because we know established houses have historically delivered higher capital gains than units, which tend to be more yield-focused.”

Perth rents soared in 2021; yields hit 4.4%

It’s not just the market’s affordabilility that has proved a key selling point for investors.

Data from SQM Research shows rents for Perth houses climbed 15.2% in the year to early 2022 (apartments: 9.0%). This has pushed yields across the city to 4.4% according to CoreLogic, eclipsing yields in Sydney (2.4%), Melbourne (2.7%) and Brisbane (3.7%).

“Strong yields in tandem with rising values are something of a holy grail for investors,” said Ms Wakeman. “Perth is ticking the boxes for both at present, and it’s driving high levels of investor interest.”

WA economy leads the nation

East coast investors concerned about the sustainability of the WA economy can take heart that the state enjoys a positive outlook.

The WA economy grew by 4.3% in 2020-21 – the strongest across all Australian states for the second consecutive year.

The McGowan Government’s mid-year review in December 2021 shows the economy is expected to grow by 3.5% in 2021-22, the fastest growth in eight years.

In addition, ABS figures show WA is starting the New Year with Australia’s lowest unemployment rate (3.8%) – significantly below the national average of 4.6%.

In 2021, jobs growth attracted high levels of interstate migration to WA, with the state recording the second highest net interstate migration growth nationally for the year ending June 2021 (behind Queensland), further increasing demand for housing and rental properties.

“Perth has a vacancy rate of just 0.6%,” says Ms Wakeman. “This is a fraction of vacancy rates in Sydney and Melbourne, which are currently 2.6% and 3.2% respectively according to SQM research. As more people choose to resettle in WA, this will add to demand for rental housing.

“2022 is expected to be a bumper year for the Perth market, and today’s investors are well-placed to benefit from the city’s affordability while interest rates remain at historical lows.

“I would encourage east coast buyer to look west. Professional buyers advocates and skilled property managers can make the experience of investing in Perth both seamless and financially rewarding.”

This article is a sponsored content collaboration with Momentum Wealth, a multi-award-winning property investment consultancy based in Western Australia.

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