Perth’s growing population to support property market prices

Perth’s property market has managed to defy 12 interest rate hikes and remain resilient, with strong population growth likely to continue the trend.

According to the Real Estate Institute of Western Australia (REIWA), Perth house prices are up 1.5 per cent to $552,000 since the beginning of 2022, however, unit values have declined 1.5 per cent to $399,000.

REIWA Chief Executive Officer Cath Hart said resilience has been the theme for 2023, with house prices continuing to grow in the face of the Reserve Bank of Australia’s record hiking cycle.

“Demand for homes is strong and is supported by population growth,” Ms Hart said.

“This is expected to continue, with WA recording a 2.3 per cent increase in its population over the year to December 2022 and forecast to grow another 1.8 per cent in 2023-24.”

The increasing level of demand and building incentives put in place by both the Federal and State Governments have led to an unprecedented increase in home construction across the state.

The number of homes under construction is now higher than the last property boom, which ended in 2015 and saw prices fall until the onset of Covid.

“There are over 20,000 homes under construction at the moment and as they are completed we will see people move out of their current residence and into a new home, freeing up some supply in the sales and rental markets,” Ms Hart said.

“This is already starting to be seen in the rental market.

“However, this won’t have a significant negative impact on prices as population growth will offset the increase in supply.

“In addition, these homes will not all be completed at the same time, so the market will not be flooded by more properties to sell or rent.”

Source: ABS

While the Perth market has been holding up in the face of higher interest rates, Ms Hart said they had still had some impact.

“We have certainly seen a decrease in sales activity in the sub-$500,000 price bracket,” she said.

“This is the segment of the market where buyers’ and homeowners’ budgets are more sensitive to the increase in interest rates and cost of living.

“Buyers have become more budget conscious and this will increase if more rate rises reduce their borrowing power further.

“And while sales activity has decreased at the lower end of the market, it is the cheaper suburbs that are recording the quickest selling times, suggesting affordability is important to buyers who are acting quickly when they spot an opportunity offering good value.”

Home selling quickly

Tight supply continues to be the main reason properties across Perth are selling quickly, with properties selling in just 10 days in June.

While the number of properties for sale on hit a 13-year low of 5384 at the end of June.

“For a couple of months, the number of sales exceeded the number of properties coming to the market, which has seen listings on decline,” Ms Hart said.

“This started to change towards the end of June, with new listings increasing slightly and sales falling below new listings.

“We expect more properties to come to the market as we move into spring. 

“However, it will be some time before we return to a traditional balanced market.” 

Rental markets show signs of easing

Ms Hart said the tight rental market is still making life hard for tenants, but conditions are improving.

The median house price hit a record $580 per week at the end of June, up from $550 in December 2022, while units rose from $475 at the end of last year to $525 in June.

“The vacancy rate has been 0.7 per cent since the beginning of the year and property managers are still seeing queues at home opens and receiving multiple applications,” she said.

“Demand will maintain pressure on prices and we will see median rents increase over the remainder of the year as 12-month fixed-term leases come up for renewal at current prices.” 

Ms Hart said there was some good news for tenants, with early signs the rental market was easing.

“Rental listings have been over 2000 since the first week in June,” she said.

And while the number of listings at the end of June was still about 6 per cent lower than in June 2022, it was a big improvement on the past few months when it was about 20 per cent lower year-on-year.

“Building completions are playing a role in the increasing listings,” Ms Hart said.

“Our members are reporting more tenants moving out into their long-awaited new homes and this is freeing up some supply.

“We are also seeing an increase in requests for additional occupants as tenants seek to split the rising rent costs as well as address the difficulty of finding a property in current tight conditions. 

“This is also easing some of the pressure on the market.”

Ms Hart said there is also strong interest from eastern states investors who see value in Perth prices and strong rental yields, which is slowly adding to supply as well.

“If current trends continue, we expect to see a slight easing in the vacancy rate in the coming months,” she said.

Meanwhile, in regional areas, conditions remain strong.

“The majority of the regional centres saw median price growth in the first half of 2023 although, like Perth, the rate of growth has been slowing,” Ms Hart said.

“Our members report well-presented homes priced to meet the market are selling quickly and attracting multiple offers.

“Population growth is supporting regional property markets and the challenges of building in regional areas are seeing more people turning to the established market.”

Vacancy rates remained low in regional centres and the lack of supply coupled with strong demand was seeing rent prices rise in the six months to June. 

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.