By David Cresp | 4 May 2023

As FY 2023 draws to a close, leading Property Economists Tim Connoley and David Cresp are forecasting that things are looking a lot brighter for the next financial year in Western Australia, with a property rebound forecast.

Some of the key drivers expected to drive this rebound include:

  • WA has a strong investment pipeline with over 60% of the nation’s resources and energy major projects based in WA. The Office of the Chief Economist estimates the current and potential investment in the mining and energy sectors is over $356 billion across 181 projects. At the top of this list are Hydrogen projects (14 Hydrogen projects with a combined potential value of over $169 billion).
  • Continued government investment on key infrastructure including Metronet and ECU.
  • A WA unemployment rate of 3.4% (ABS seasonally adjusted) and continuing record levels of job vacancies. 18,000 new jobs have been added to the WA economy in the 12 months to March 2023.
  • International students have also come back to WA and all of the Purpose Built Student Accommodation in Perth is now full.

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).

 

Whilst new housing supply is on the way, the challenges of Perth’s building market have meant that completions have not been keeping pace with commencements. However, the building market is now starting to catch up and will see completions continue (if not increase) at current levels, despite commencements decreasing.

Residential Dwelling Commencements and Completions

 

 

Source: ABS

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.”

David Cresp View Profile
Tim Connoley View Profile