Surging WA Market, defies national trends

09 Jun 2022| Posted by: Geoff Baldwin

Perth house prices reached a median of $562,000 during the year to April and are predicted to continue to rise in response to a lack of stock and high buyer demand, experts say.

And most property pundits agree the West Australian capital is in a different situation to other Australian cities due to enduring years of negative house price growth.

Realmark Coastal director Sean Hughes said a lot of Perth property prices remain where they were 10 years ago.

“The recent increase in pricing has been more of a correction after eight years of negative growth,” Mr Hughes said.

“Perth has underperformed in comparison to the rest of the nation, and also on a global scale, and is set to continue to have strong growth moving forward to bring it back in line to where it should be.

“Perth having the lowest median house prices in the nation is an imbalance and one that buyers from Sydney, Melbourne, and Brisbane have all realised, leading to many purchasing property here in recent months.”

PropTrack economist Anne Flaherty said Perth’s house prices recorded 8.7 per cent annual growth in April, with median unit prices rising 2.1 per cent year-on-year to reach $398,000.

Ms Flaherty said Perth is coming out of a period where prices have been in the doldrums.

“But we have really started to see, over the past couple of years, this growth cycle,” Ms Flaherty said.

“So, while we don’t anticipate to see the same level of growth we saw last year in Perth, we would expect to see some continued upward movement in prices.”

Property analyst and valuer Gavin Hegney said Sydney, Melbourne, and Brisbane’s property markets have moved well in advance of Perth.

“Perth hasn’t really done much at all since 2014 and has woken up in the last twelve months,” Mr Hegney said.

“So, it has slipped in its rankings. Now, there is two ways for it to go back into that long-term position to go back into play, and that is everything else drops back and Perth stays where it is, or Perth goes up at the other end of the extreme and everything else sort of stays where it is."

He expects prices to continue rising throughout 2022, and possibly beyond.

“Secondly, it has some of the strongest yields in Australia, so the rent versus buy option in Perth is extremely close, whereas in Sydney and Melbourne, you have got maybe a gross yield of 2% or less. It’s a lot cheaper to rent than to buy.

“The reality on the ground is it’s hard to get a rental property (in Perth) and if you are chasing a home for sale that’s half reasonable, you are going to be competing against a lot of other offers.”

The Perth property market’s biggest challenge is a lack of supply – of properties for purchase, and especially of rental properties, Bankwest Curtin Economics Centre director Alan Duncan said.

“This is certainly pushing up prices, but it also creates a significant barrier for those seeking to move to the state for work – something that is desperately needed in the short-term to fill vacancies and overcome the state’s chronic skills shortages,” Mr Duncan said.

He said the market is currently heavily supply constrained.

“And this has been pushing prices hard. Perth’s quarterly CPI for new dwelling purchases has risen by 15.8% in March 2022, on the back of a 5.2% increase in the previous quarter to December 2021.”

Meanwhile, Mr Hughes said Perth’s property market is still quite hot and there remains room for it to get hotter.

“It is undersupplied with available property and there are local, international, and eastern state buyers competing for relatively cheap property, based on overseas and eastern states prices,” he said.

“Sellers are confident and so are buyers. Sentiment is positive. However, in lower-priced areas sentiment is more cautious due to interest rates looking set to increase in the near future.”