The latest numbers out of the Real Estate Institute of Australia reveals Perth as the most affordable capital of any state in the country. Median home prices across Australian capital cities continue on an upward trend, up 18.4% annually.
Hobart led the charge, up 26.2% in twelve months. Sydney moved up 24%, Darwin improved 21.5% and Perth came in last at 8.4% in home price growth for the twelve months ending 30th June, well below the national average and the only capital to increase less than 10 percent.
These numbers may come as a surprise, especially to the many buyers struggling to find suitable homes at affordable prices across our city. Anecdotally, local agents continue to report low supply, high demand, short selling days and fierce buyer competition for quality homes.
As expected, I am often asked about the likely future direction of the local property market. Of course, accurately predicting the property market is never certain but these latest numbers point to Perth’s property market continuing its recovery. This view is supported by the following observations:
Firstly, it does not seem logical that Hobart’s moving annual median house price is $608,400 against Perth’s $497,300. Our economy is far larger and more productive than Tasmania’s, our budget surplus the best in the nation and our employment figures superior. Tasmania’s market performance is being led by (a now slowing) population influx from tree-changing, right-sizing retiring Victorians.
Secondly, WA’s population is beginning to rise and if it wasn’t for our hard border with the populous NSW and Victoria, it is likely our population would be rising faster than the 0.6 percent rate achieved over the past twelve months. WA’s population is currently growing faster than all other states apart from Queensland, another resource-led economy. An increasing population is one of the driving factors behind price and rent increases for any property market because it puts pressure on supply.
Thirdly, investors remain spooked by WA’s relatively poor market performance since 2009. Investor finance in WA is the second lowest in the nation behind the Northern Territory and well below the national average. Investor finance represents 18.8 percent of all loans in WA compared to 27.8 percent nationally. By comparison, in NSW, 32.3 percent of lending funds go to investors, in Queensland it’s 27.9 percent and South Australia’s investors take up 24.2 percent of funds. Interestingly, annual yields in Perth (thanks largely to our relatively low median home prices) are at 3.3 percent, the best performing capital behind Darwin’s 4 percent. By comparison, Sydney yields are at 1.6 percent. Based on these numbers, it is somewhat inevitable that investor appetite for Perth property will begin to rise from its low base, especially considering our attractive yields.
Finally, once COVID-19 vaccination rates get to sufficient levels to enable the re-opening of borders, WA is likely to become a desirable destination for those seeking affordable property, higher wages and an enviable lifestyle. Our real estate is very affordable compared to the Melbourne and Sydney markets in particular and if east-coasters move west in large numbers, watch our property values grow significantly.
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