Why it’s a good time to invest in WA property

In the national landscape, property investors should not overlook the potential Western Australia offers as the state's economy continues to grow strongly and a long-awaited property market recovery gathers momentum.

Damian Collins, REIWA President
Damian Collins says aligning fundamentals are creating strong opportunities for investment in WA property. Photo: REIWA (Image source: Shutterstock.com)

In the national landscape, property investors should not overlook the potential Western Australia offers.

Often overshadowed by the bigger property markets on the east-coast, WA by comparison doesn’t get as much attention. 

But look beneath the surface and there is huge potential for investors to take advantage of WA’s strong economy and recovering property market.

To say the last 15 months have been a journey in the WA market is an understatement. 

After a long and sustained downturn, property prices finally bottomed out in July 2020, before they started to find their feet in the back end of 2020 and then experienced accelerated growth in the first half of 2021. 

Since the bottom of the market hit, REIWA statistics show the Perth median price reached $520,000 in August, up from $475,000 in July last year. 

Other key market indicators tell a similar story, with the median time to sell a home in Perth over the last year declining from 34 days to 18 days and listings for sale reducing by 20 per cent. 

This is a fast turnaround and illustrates the immense competition between buyers in WA when trying to secure a property.

Also running parallel to the burgeoning sales market is the rental market, which saw the Perth vacancy rate plummet to a 40-year low of 0.8 per cent in November 2020. 

Since that time, the Perth rental vacancy rate has lifted slightly to 1.1 per cent but remains well below the three per cent vacancy rate figures we’d expect to see in a ‘balanced’ market. 

When we look outside of Perth, the rental shortage in regional WA is even more acute, with the vacancy rates in Albany, Broome and Bunbury still below one per cent. 

In Perth, the growth in median house sale price and median rent price has been widespread across the entire region. 

From as far south as Mandurah all the way to Joondalup and beyond, REIWA agents have reported strong price growth. 

REIWA data shows that 238 suburbs recorded an increase in median house sale price during the year to July 2021, while 268 suburbs saw their median rent price increase.  

Despite the strong growth recorded over the last year in both sectors of the residential property market, WA remains the most affordable state in the country for housing. 

The Real Estate Institute of Australia releases a Housing Affordability Report every quarter which looks at the nation’s housing and rental markets, both as a whole and at an individual state level. 

It determines affordability based on how much of the average family income is required to meet home loan and rent repayments in each state. 

In the June 2021 quarter, the proportion of income required to meet home loan repayments in New South Wales was 43.9 per cent, whilst in Victoria it was 35.6 per cent. 

This is a stark contrast to WA, where the proportion of income required to meet home loan repayments was just 26.5 per cent.

Given WA is currently in a growth cycle, now is a great time to get into the market while prices are still relatively affordable.

There is no clearer representation of the excellent value available in the WA property market than when comparing the cheapest suburbs within 10 kilometres of the CBD in Perth to the equivalent suburbs on the east coast, in cities like Sydney and Melbourne. 

CoreLogic data shows that in Melbourne, the ‘cheapest’ suburb within 10 kilometres of the CBD is Maidstone with a median house price of $922,681, whilst in Sydney, the most ‘affordable’ suburb within 10 kilometres of the city is Arncliffe, with a median house price of $1.455 million. 

Comparatively, in Perth, the cheapest suburb within 10 kilometres of the CBD is Westminster, with a median price of just $404,000. 

Effectively, you could buy 3.5 properties in Westminster for the cost of just one in Arncliffe. 

Of the 10 most affordable Perth suburbs within 10 kilometres of the CBD, all 10 have median house prices below $600,000, with five of those below $500,000. 

Rental yields are also quite healthy in WA, with the Perth house yield sitting at 4.5 per cent, compared to 2.6 per cent in Sydney and 2.9 per cent in Melbourne. 

When we take a closer look and drill down to suburb level, REIWA analysis shows 147 Perth suburbs have house rental yields above four per cent, with 43 of those above five per cent.

With record low interest rates, healthy yields, house prices on the rise (yet still very affordable) and a very competitive rental market environment pushing rent prices up, it’s a good time to consider investing in the WA property market.

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