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Perth Housing Market Insights: January 2022


The Urban Developer’s latest Perth housing market insights reveals the city could be primed for a mini property boom after borders, closed for almost two years by the pandemic, finally reopen.

This resource, updated periodically, will collate and examine the economic levers pushing and pulling Perth’s housing market.

Combining market research, rolling indices and expert market opinion, this evolving hub will act as a pulse check for those wanting to take a closer look at the movements across the market.



Perth median property prices % change

TypeMonthQuarterAnnualMedian
All0.6%▲1.2%▼11.2%▼$531,243▲
Houses0.7%▲1.3%▲11.4%▼$555,851▲
Units0.0%▼0.7%▲9.6%▼$401,647▲

^Source: Corelogic - January 2021

As Australia’s capital cities recover from Covid-19 lockdowns and restrictions, Perth’s housing market remains isolated, cut off by interstate border restrictions.

Despite the strong price growth in 2021, Western Australia is still the most affordable state in the nation, with Perth's housing market remaining 3.4 per cent, or roughly $18,000, below their 2014 peak. 

Perth’s house prices increased by 13 per cent in 2021, with the median price now $531,000, following a peak-to-trough fall in values between April and September 2020.

Perth’s monthly rate of growth has now slowed since the highs seen in March this year, when dwelling prices reached a monthly growth rate of 1.8 per cent.

January’s bump in dwelling prices was a modest lift from December’s result, when dwelling values grew at a rate of 0.4 per cent, while house prices have also ticked up as unit values continue to remain flat.

According to Corelogic, property values rose 0.6 per cent in January and are now up 11.2 per cent over the year, providing sellers with a gross yield of 4.4 per cent.

Dwellings values as a whole advanced by an additional $2500 over the month of January.

The average house in Perth is now selling for $555,000 while the average unit is now around $400,000.

Perth's median house value is the second-lowest in the country, behind Darwin. 

A typical Perth house is now about $65,000 more expensive than it was at the beginning of 2021, while units have experienced a gain of $35,000.



Perth's housing market: policy updates and trends

Spending and property prices on the rise

Consumers and homebuyers are defying Omicron and speculation about higher ­interest rates, with credit and debit card spending rebounding to pre-outbreak levels and the housing market tipped to rise about 6 per cent this year.

Values in Sydney, Melbourne and Perth are on track to grow by between 3 per cent and 7 per cent this year.

Perth inflation hits 20-year high

Living costs are rising far quicker than economists and politicians are appreciating in Western Australia.

Perth households endured their biggest price increases in 20 years in 2021 after an unexpectedly sharp spike in consumer costs in the December quarter sent national headline inflation to 3.5 per cent, reinforcing prospects of a rise in official interest rates this year.

Western Australia’s hard border reopens

Brisbane house prices could more than double by the time the 2032 Olympic Games roll around, taking median home values above $1.4 million, economists predict.

The growth rate would be consistent with the market’s past performance during the G20 summit in 2014 in Brisbane, when dwelling prices surged 112.7 per cent over 12 years from when the event was announced in 2003 to 2015, a year after it was held.



What the experts are saying about Perth's housing market


Eliza Owen
Head of Research
Corelogic

“Perth is still recovering from the post-2014 mining downturn, with dwelling prices up the same 13.1 per cent over 10 years and units still 14.4 per cent below their 2013 peak.

“The increase in the rate of profit-making sales is a reflection of strong capital growth across Australian dwelling markets despite Covid-induced disruptions to transaction activity.”


Shane Oliver
Chief Economist
AMP Capital

“While a delayed coronavirus wave was expected to hit Western Australia, it will not have a big impact on the property market.

“The experience in Australia’s property market is that any interruption from coronavirus tends to be short-lived.

Western Australia, like Brisbane and Adelaide where prices have risen substantially, would benefit from people relocating to the state again once borders open—including those looking for more affordable property.”


Nicola Powell
Chief of Research and Economics
Domain

“Perth has been benefiting from a positive net flow of residents into the city, although easing slightly from the highest point in eight years. This has been a huge change for the city that had seen a drain of residents away. 

“Sale volumes are sitting close to record numbers and demand remains strong but looks to be easing.

“Once borders reopen, this could provide another wave of new demand, freely allowing an easier relocation from overseas and interstate.”


Louis Christopher
Managing Director
SQM Research

“I think the probabilities have increased that sometime next year, we will see a peak in prices and regional Australia will start to see falls.

“We’re now at a point where lockdowns are ending and travel is restarting, so I’m expecting to see a swing back towards the cities over time and there will be a move away from the regions.”



Perth housing market forecasts

ANZ has tipped house prices to jump by 3 per cent next year in Perth before falling by 10 per cent in 2023 as the post-pandemic boom cools.

CBA now expects Perth house prices to increase by 3 per cent this year before plunging by 9 per cent in 2023.

NAB is forecasting Perth house prices to rise moderately in 2022 before declining by 8 per cent in 2023.

Westpac has also updated its property forecasts, with Perth real estate prices tipped to fall by as much as 14 cent in 2023.



Perth auction clearance rates

WeekClearance rateTotal Auctions
Week ending 10 January 2022N/AN/A
Week ending 17 January 2022N/AN/A
Week ending 24 January 202250%13
Week ending 31 January 202270%15

^Source: Corelogic - January 2021

After leading the initial charge, the Sydney and Melbourne housing markets have cooled—whereas Sydney is grinding out modest gains, prices in Melbourne appear to be flat-lining. 

Unsurprisingly, cheaper markets such as Brisbane, Adelaide and Perth, which previously lagged the larger capital cities, are driving the last legs of this boom.

While auctions may not be ubiquitous across Perth, the city's top growth suburbs for median house sale price over the past year have been Bicton, Maddington, Palmyra, Hilbert and Orelia.

Of the auctions held in January, only 40 occurred in Perth, representing the second lowest figures logged in the country, while Sydney and Melbourne recorded a combined 1400.

Despite the low rate, Perth homeowners have enjoyed huge auction wins this year, including a South Perth home that sold for $2.8 million in March 2021.

Strongest price gains have been found in top-end suburbs such as South Perth and City Beach—in Perth’s western suburbs.

Demand for homes in the school catchment zones such as Eastern Hills High School in the Perth Hills suburb of Mt Helena has seen house prices skyrocket by more than 40 per cent over the past year.

Median house prices in the metro area are now expected to jump from $520,000 to $575,000 by the end of 2022.

Western Australia's border reopening will set the stage for another year of solid growth in house prices in 2022.

The Real Estate Institute of Western Australia (REIWA) predicts house prices will jump 10 per cent this year as the state finally opened up its borders to interstate and overseas migrants in early February. 

Perth’s auction clearance rate had been steadily rising since July 2020, coinciding with the Perth market boom.

The city has held a steady Perth clearance rate, north of 60 per cent, throughout the beginning of 2022.

According to the REIWA, auctions account for only two per cent of property sales in Perth compared to 30 per cent on the east coast, where the process is lauded for its ability to achieve strong prices for homeowners.



Perth residential rental vacancy rate

CityVacancy rateMonthly % changeVacanciesNet change
Perth0.6%0.0%▶1382▲68▲

^Source: SQM Research - December 2021

The only capital city that did not see the rental vacancy rate tighten over January was Perth, where the Western Australian borders remained firmly closed to the rest of the nation and overseas.

Perth’s residential vacancy rate has remained flat in December, at 0.6 per cent, after reaching the lowest levels over the past 40 years, with the previous low of 0.8 per cent reached in 2007. 

Listings lowered to 1382 in December, well over half the number available in the same prior the year prior with upward pressure on rents pushing Perth’s median increase by $10 over the month.

Despite the increases, Western Australia is still the most affordable capital city to rent in across Australia, with the proportion of family income in Western Australia required to meet the median rent is sitting at 17 per cent. 

Comparatively, Western Australia is also performing extremely well when compared with Queensland at 21.6 per cent, Victoria at 22.4 per cent and New South Wales at 28.4 per cent.

Rents are now expected to increase due to supply and demand factors which in turn will encourage investors back into the market to increase stock levels.

However rents are not expected to increase to surpass cities on the east coast on the affordability scale.

Perth rent prices

TypeRentMonthly % changeAnnual % change
Houses$558.00▲0.9%▲12.8%▲
Units$403.70▲1.0%▲9.0%▲

^Source: SQM Research - December 2021

Western Australia's border reopening will set the stage for another year of solid rental price growth. 

At the beginning of the pandemic, in mid-2020, rentals in Perth for homes and units were the cheapest in the country.

Median rent prices are expected to increase between 10 and 15 per cent during 2022, which is expected to re-energise the investor market in Western Australia.

Despite this, the Perth rental market is still very affordable, with Western Australia tenants enjoying the cheapest rental market conditions in the country.

At the moment, Sydney generally is offering only a 2.6 per cent yield on houses with Melbourne 2.92 per cent, Canberra 3.7 per cent and Hobart 4.15 per cent—all record-breaking lows.

Comparatively, Perth has the best on offer at 5.2 per cent, and Darwin is only slightly lower at 5.17 per cent.

Domain chief of research and economics Nicola Powell said the biggest concern for people in Perth was how quickly rentals had surged.

"If we continue to see house rents grow at the same quarterly rate of growth, it could mean that they surpass that mid-2013 rental price peak by the end of this calendar year," Powell said.



Western Australia building approvals

DwellingApprovedMonthly % change
Houses1313▲0.8%▲
All dwellings1459▲-7.7%▼

^Source: Australian Bureau of Statistics - December 2021

The home building boom is continuing into 2022, even as constraints in terms of land availability, labour and materials push up the price of a new house.

New home sales have been the strongest since 2017 with construction commencing on over 115,000 detached homes nationally.

The impact of the coronavirus pandemic has seen a clear shift towards lower density housing and this trend is showing no signs of slowing.

In Western Australia, approvals for houses increased by almost 1 per cent in December while higher density housing approvals retreated by almost 8 per cent.

Across Perth, the construction industry also faces constraints in land availability, labour and materials.

Construction prices have remained heightened off-the-back of the federal government’s HomeBuilder scheme and a subsequent record-setting surge in house approvals which peaked in March.

Western Australia posted a 7.9 per cent rise in construction costs for the year, the fastest pace of growth in more than two decades.

Comparatively, construction prices in South Australia similarly spiked by 7.9 per cent, while in Queensland prices lifted by 7.3 per cent and in Victoria, 7.1 per cent.



Western Australia home loan lending indicators

TypeLending ($bn)Monthly % change
New loan commitments for owner occupier housing3.81-3.7%▼
New loan commitments for investor housing2.108.8%▲

^Source: Australian Bureau of Statistics - December 2021

The latest figures from the Australian Bureau of Statistics for new and existing dwellings show that, in November, average loan sizes reached record highs in all states and territories except Western Australia.

The average loan size for Western Australia is now $450,000 almost $40,000 more than the same time last year.

Predictably, the top three places for mortgage size pain are New South Wales at $769,000, Victoria at $619,000 and the Australian Capital Territory at $586,000.

Owner-occupier housing rose 5.3 per cent, with Western Australia clocking a 7.1 per cent increase.

Along with Victoria, up 5.2 per cent and New South Wales, up 3 per cent, Western Australia drove the overall rise in owner-occupier loan commitments.

With official interest rates forecast to rise later this year—and variable-rate mortgages soon after—these numbers could be enough to spark an increase in household mortgage stress.

REIWA President Damian Collins said Western Australia could anticipate more investors in 2022, which will increase investor finance.

The owner-occupier market will remain strong, particularly the upgrade market,” Collins said.

“The other states might soften off a bit in the next year, but we’ll likely to continue to grow as we catch up to some of their growth.”



Western Australia interstate migration

StateArrivalsDeparturesNet change
Western Australia9161▲7522▲1639▲

^Source: Australian Bureau of Statistics - March 2021

Western Australia continues to benefit from the pandemic-fuelled pain in the eastern states with thousands of residents moving to more isolated parts of Australia.

The latest figures from the Australian Bureau of Statistics reveal Western increased its net migration by over 1600 people between January and March of 2021 as arrivals outstripped departures.

There were 9000 people who moved to Western Australia during the three month period and 7500 residents who left.

There were over 100,000 people who moved interstate during the first three months of the year, with Queensland gaining the most people; 7000, while Victoria lost the most closely followed by New South Wales.

A total of 400 interstate and 60 international flights are expected to land in Perth this week after the state government decided to open the Western Australia hard border on February 5.

Meanwhile, the federal government’s decision to open to international travellers from February 21 will likely see even more people able to make it into Western Australia over the coming weeks and months.


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Article originally posted at: https://www.theurbandeveloper.com/articles/perth-housing-market-update