Perth’s housing values have increased more than 50 percent since the end of 2019 firmly putting an end to speculation that our run of price gains was purely due to the low interest rate, stimuli-fuelled COVID period. Core Logic reports Perth’s current median home value to be $687,004 up 52.9 percent since the bottom-of-the-market March 2020 price of $449,325. Current values eclipse the previous 2014 peak of $518,540.
We’ve been witness to similar markets in the past. For example, back in 2006, Perth’s median house value rose a whopping 40.6 percent in twelve months thanks to the mining boom. Prices retreated relatively quickly after mining-related construction jobs ended and workers returned to whence they’d come.
Back then, WA’s population gains went from +1,000 persons per week to -150 per week in a short period, hence the fairly spectacular downward adjustment in house values; demand simply fell away. There is a fundamental difference in Perth’s housing landscape this time around with population gains, low housing supply and relative affordability the three fundamental drivers of our market. These three factors are set to underpin positive house price growth for at least this year and into next with no predictable market shock on the horizon to bring this upward trajectory to a premature end.
Considering each fundamental in turn, Perth’s house prices could gain a further 15 to 18 percent this year based on current trajectories.
WA’s changes to population growth are at peak levels with around 22,000 new arrivals quarterly. Overseas migration is out-pacing interstate migration growth and with a housing shortage, the demand for more homes inevitably pushes up house prices. Meanwhile, REIWA continues to report low listing numbers currently at about 3,250, well below long term averages.
The supply pipeline looks bleak too with current annual dwelling approvals 24 percent below the 10-year average for houses and an astonishing 74 percent below for units. Clearly, we are not going to be building enough homes for to cater for our population gains anytime soon. In fact, WA is leading the nation in terms of time taken to build new homes.
Yet Perth remains one of the most affordable places in the nation to buy property with a year-to-date median house price of $718,500, well behind Sydney’s $1,395,804, Melbourne’s $942,671 and Brisbane’s $899,474. We have nudged past Hobart’s $696,508 in recent months. And the percentage of average household income to service current average mortgages in Perth is 29.8 percent, way more affordable than Sydney’s 58.1 percent.
Interest rates are predicted to fall later this year as the broader economy slows. It’s foreseeable that such a move will add further fuel to Perth’s already hot property market.
You know you’re getting on a bit when you start sounding like your parents. Starting a sentence with, “Well, in my day…” is a tell-tale sign. This week’s column has that flavour as a lament of real estate days gone by. As an active selling sales representative for John Dethridge … Read more
The global COVID-19 pandemic fundamentally changed Perth’s property market. When COVID hit, most property commentators predicted property values would fall by about 20 percent – they were about 40 percent wrong. Property prices in Perth have risen by 75 percent since March 2020. Rent’s have gone up by the same … Read more