Perth Residential Property Market Poised for Rebound

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Unlike other states, Perth property prices have stabilised rather than decreased. We see that continuing demand and low stock levels of existing houses on the market will lead to an increase in price pressures

The continuing strength of  WA’s economy is a key contributor to the strong population growth over the last 12 months with a population increase of 50,400 people in the 12 months to September 2022 (1.8% increase). WA’s population growth has exceeded expectations, with the WA mid-year review financial projections released in December 2022 forecasting population growth of 1.5% in FY 2023 and the same in FY 2024, forecasts which now look quite possible to be exceeded.

Whilst interest rates have increased rapidly, there are now signs that rates are close to the top of the current cycle and forecasts showing that rates could start to decrease  in 2024.

Mr David Cresp said “we believe that the fundamentals for WA are looking positive and will continue to drive demand for WA residential property over the next 12 months. Unlike other states, Perth property prices have stabilised rather than decreased. We see that continuing demand and low stock levels of existing houses on the market will lead to an increase in price pressures.”

Rapid population growth will continue to put pressure on the already low vacancy rate with REIWA showing that the vacancy rate has fallen to 0.7% in March 2023, compared to 1.2% in March 2022 and 0.9% in March 2021. This compares to a balanced market vacancy of 2.5% to 3.5%.

The low vacancy rate means that in the three years to April 2023, rents have increased by 47% to $550 per week (based on REIWA data).

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There is continued high levels of investor interest in Perth’s greenfield market, with first home buyer activity declining. 

Tim Connoley said that “Perth residential land sales are on track to decline about 35% in FY23 from a strong FY22 due to a combination of sector capacity and interest rate uncertainty. However, we are forecasting increases in FY24 and FY25.

We are expecting easing capacity constraints on land delivery and construction and the stabilisation of mortgage rates to support sales growth of about 30% in FY24.

Whilst there is undoubtably global economic risks, declining 3-year fixed rate mortgages towards 4.5% later this year and population and rental pressures are likely to see an increase in demand from first home buyers for land over the next 12 months.”