Perth is the most competitive housing market in the country right now and whether you’re buying or renting there’s a shortage of stock on the market.
With home prices up 10.90% over the past year, Perth is Australia’s top performing capital city market when it comes to price growth.
That’s more than five times the the historic average pace of annual growth experienced in Perth, bringing prices to a record high.
If growth continues at the same pace as over the past quarter, prices in Perth would be set to end the year up 12%.
Perth’s rental market is also challenged. Although the greatest increases in advertised rents over the past year have been seen in Sydney (+18.2% year-on-year), closely followed by regional WA (+16.7% year-on-year) and Perth (+14.9% year-on-year).
The critical lack of available rentals is causing rental prices to increase at a rapid pace.
Buyers and renters competing for fewer homes
Total for-sale listings are currently at historic lows in Perth (on records back to 2004) and total rental listings are also at historic lows.
At the same time, the pipeline of new supply remains constrain
As a result, growth in the supply of new housing is limited at a time when there is already a shortage.
The number of enquiries per rental listing are the highest in Perth (50.3) of any market, illustrating the severe imbalance between rental demand with rental properties in short supply.
To put this into perspective, nationally, the number of enquiries per for sale listing increased 14.1% year-on-year in September but remains below the record high levels seen in late 2021.
In contrast, enquiries per for sale listing in Perth have jumped by 93.9% year-on-year and are sitting at a record high level.
Fewer new listings and faster selling times have driven total for sale listings lower, and there were 25.7% fewer homes listed for sale in Perth in September of this year compared to last.
This strong competition is likely one reason why Perth has overtaken Adelaide as the strongest performing capital city market for price growth over the past year, as buyers compete for limited options.
Limited supply amid strong buyer demand has resulted in a sellers’ market, with prices in Perth outpacing all the other capitals.
Prices in Perth were unaffected by last year’s rate rises, and while prices fell in most markets, Perth avoided the downturn. That stronger growth has continued into this year.
The attraction of Perth
One reason Perth is one of the hottest markets in the country is its relative affordability.
Despite recent gains, Perth housing values remain affordable compared to other capital cities after a decade of underperformance relative to east coast capitals. Darwin is the only capital with a lower median dwelling value.
The PropTrack Housing Affordability Index shows that housing affordability is highest in Western Australia, a factor likely to attract both local, international, and interstate buyers.
Strong population growth is also adding to housing demand, predominantly in the rental market given recent arrivals are most likely to rent. In the 12 months to March 2023, Western Australia’s population grew by 2.8% – the fastest growth of all the states and territories.
Population growth is also driving demand in the market to buy, particularly given the challenging conditions in the rental market that may incentivise some to purchase sooner than they otherwise would have.
The Western Australia government is actively promoting the state as a destination for skilled work regional migrants (491 visas) and has successfully lobbied to have the entire state declared a designated regional area. This means that skilled migrants on regional 491 visas can arrive, live and work in Perth, making it the only capital city which has achieved this distinction.
The outlook for Perth remains challenging with net migration and population growth set to remain strong, with vacancies already historically low.
The comeback state
Western Australia has historically been the most volatile state in terms of economic performance.
Following a period of rapid expansion during the mining boom, Western Australia’s economic growth lay largely in the doldrums until 2019.
But the state is now making a comeback. Buoyed by strong export demand, Western Australia’s economy has grown more rapidly than any other state’s over the past year, with state final demand up 2.8% the 12 months to March.
The city of Perth is booming. Picture: Getty
Western Australia has one of the lowest rates of unemployment at 3.4%, and one of the highest participation rates.
The strengthening economy, strong demand for labour and prior decade of underperformance relative to the east coast capitals are all likely to be ongoing drivers of Perth’s housing market.
It seems unlikely that these conditions will change any time soon given resurgent population growth, the lack of new home completions and the overall strong demand for housing.
The comparative affordability of homes, population growth, a shortage of housing and very tight rental markets are likely to continue to buoy both home price growth and rental price growth in Perth.
Source : RealEstate.com.au