Whether you are a first-time homebuyer, an investor, or someone looking to upgrade your living situation, keeping an eye on market trends is crucial. In the current Australian property market, Perth has emerged as a beacon of steady growth amidst national uncertainty. As the new financial year begins, it’s the perfect time to navigate this dynamic landscape with an experienced ally by your side. ProProperty Group, with its deep market insights and dedicated team of experts, is poised to guide you through your property journey.
The predicted growth rates
As the new financial year begins, an interesting phenomenon has been unfolding in the Australian property market, with Perth taking the limelight. All indications suggest that the city’s property market is set to experience steady growth, even as other cities grapple with uncertainty and the negative impacts of interest rate hikes. The latest report from Domain, a leading property market analyst, predicts that the median house price in Perth could surpass AUD 700,000 for the first time, marking a significant milestone in the city’s property market history.
The report further estimates that house prices are likely to rise by 1–3 percent by the end of the 2023–24 financial year, suggesting that the median house price could range between AUD 704,000 and AUD 718,000. This trend of stability and growth contrasts sharply with other capital city markets, especially Sydney, Canberra, and Brisbane, which have experienced significant downturns in recent times. The stability of Perth’s market has been attributed to its relative affordability and positive migration patterns.
Dynamics of housing and unit prices
In the thriving market, an interesting divergence between housing and unit prices in Perth emerges. Despite the overall bullish market, unit prices, unlike the steadily rising house prices, are expected to stay below their mid-2014 high of AUD 422,181, with a predicted gap of about AUD 36,000 to AUD 43,000.
This divergence is not indicative of market instability but rather reflects market forces and demographic shifts. The market strength is bolstered by population pressures and increased housing demand, driven by factors like low interest rates and government incentives.
On the contrary, the unit market has seen slower growth possibly due to a surplus from increased construction post-2014 and changing consumer preferences towards space and privacy.
This discrepancy poses both challenges and opportunities. Astute investors and homebuyers who understand these dynamics can leverage them to their advantage, navigating this complex landscape with proper insights and guidance from market experts such as ProProperty Group.
Role of migration in driving market trends
Domain’s Research and Economics Chief, Nicola Powell, points out that the increase in temporary and permanent migration since the international border reopened in late 2021 is a primary factor in the increased demand for housing. This surge in population, she believes, will continue to push housing demand and property prices higher over the next 12 months.
Increased migration into Western Australia, driven by job opportunities and the allure of a prosperous lifestyle, has been a significant factor in maintaining the demand for housing. Coupled with improved flight connectivity enhancing Perth’s accessibility to the rest of the world, these factors have increased the demand for properties, pushing prices higher.
Supply and demand dynamics
Trent Fleskens, Managing Director of Strategic Settlements, lends credence to the bullish outlook of Perth’s property market. With years of industry experience, Fleskens offers a keen understanding of the property market’s dynamics, particularly in the context of supply and demand.
He emphasises that the persistent high demand for properties in Perth, coupled with the struggle to match supply, is driving the continuous rise in property prices. This imbalance isn’t new, but its current magnitude is significant, despite efforts from the construction sector.
For Fleskens, this supply-demand disparity is a primary driver of property prices, backed by favourable government policies, low-interest rates, and increasing population pressures. Unless these dynamics drastically shift, he believes a downturn in Perth’s property market is unlikely. Any softening would require either an ample increase in property supply or a significant reduction in demand, both of which seem unlikely given the current circumstances.
Fleskens’ bullish outlook doesn’t just focus on the present, but also takes into account future trends that might influence demand. His viewpoint offers valuable insights to prospective investors and underlines the importance of understanding the fundamental supply-demand dynamics, reinforcing the belief in Perth’s property market’s continued growth and resilience.
Influence of interest rates
Interest rates play a significant role in property market dynamics, affecting the borrowing cost and thus influencing investment decisions. Trent Fleskens highlights this relationship, adding a crucial caveat: substantial shifts in property price growth rates primarily occur when the Reserve Bank changes its interest rate policies.
Fleskens argues that while rising interest rates usually dampen property price growth, the impact isn’t instant due to the delayed effects of monetary policies. As such, he suggests the Perth property market could continue its upward trajectory in the face of interest rate hikes, until a policy reversal by the Reserve Bank.
This resilience in Perth’s market is fostered by several factors, including a persistent supply-demand imbalance, beneficial government policies, and demographic trends that sustain the current growth.
Fleskens’ insights underscore the importance of understanding interest rates within the larger property market context. Despite the upward trend in rates, the underlying market dynamics continue to support robust property price growth in Perth, indicating its resilience and strength.
Perth’s home value index
In the fast-changing property market, tracking reliable indicators like the Home Value Index is crucial. Reports from CoreLogic show Perth’s Home Value Index displaying reassuring growth, indicating a robust market.
In May alone, Perth saw a 1.3% rise in the home value index, with a more extensive 2.4% increase over the last quarter, signifying steady market growth. Notably, Perth, along with Adelaide, is one of the only capital cities showing year-on-year growth, highlighting its resilience amidst broader market changes.
A significant achievement is the return of dwelling values in Perth to their record highs, demonstrating the market’s resilience despite potential challenges. These positive trends suggest a bright future for Perth’s property market. Its ability to maintain growth amidst various conditions underscores its attractiveness to property investors and homeowners.
Factors contributing to high property prices
Perth’s stunning beaches and the low availability of housing play a significant role in maintaining high property prices. Real estate agents report that conditions reminiscent of FOMO (fear of missing out) are becoming increasingly apparent due to rapidly depleting stock levels of properties for sale. This reduction in available properties has created a highly competitive market environment, with properties selling at an incredibly fast pace.
Comparison with other cities
In contrast to the Perth property market’s resilience, other cities like Sydney have been struggling. Sydney recorded a 13.4% dip in median property prices as the city’s real estate market responded to interest rate rises. However, despite 12 interest rate rises over the past 14 months, Perth’s property market has held steady, backed by strong demand, a robust economy, low unemployment, and relatively affordable housing.
The situation in Western Australia
Cath Hart, CEO of the Real Estate Institute of Western Australia (REIWA), suggests that a combination of factors such as a strong economy, lower average loans, higher average wages, and relatively affordable housing has put Western Australians in a better position to manage higher repayments, ensuring the stability of Perth’s property market.
The bigger economic picture
Perth’s resilience can be attributed to its robust local economy. With a gross state product of AUD 361.8 billion shared among a relatively small population of just over 2.5 million, the city offers a strong economic backdrop to the property market. The economy’s expected growth of more than 4% in 2023, mainly driven by its well-serviced mining industry, further strengthens this outlook.
Summary
As we venture into the new financial year, it’s imperative to understand the landscape of the Australian property market, which has been seeing interesting fluctuations. Amidst the dynamism, Perth emerges as a beacon of steady growth, making it a promising destination for investors and homebuyers. The city’s property market continues to showcase resilience, even as other capital cities grapple with volatility, largely attributed to its relative affordability and positive migration patterns.
An interesting characteristic of this market is the divergence between housing and unit prices. This dynamic is not indicative of market instability, but a reflection of various market forces and demographic shifts. By understanding these nuances, investors can capitalise on these trends to maximise their returns.
Migration trends are also playing a significant role in driving property demand. With the reopening of international borders, there’s been an increased influx of residents into Perth, which is further fuelling the property market. On top of this, the supply-demand dynamics in the city are contributing to continuous property price growth, which is expected to persist unless there are significant changes.
Navigating this dynamic landscape might seem complex, but with the right guidance and insights, you can make informed decisions that align with your property goals. This is where ProProperty Group comes into the picture. Our dedicated team of experts backed by deep market insights can help guide you through your property journey, ensuring you are well-positioned to take advantage of the opportunities that the Perth property market presents.
As we head into this new financial year, there’s no better time to start planning your property investment strategy. With Perth’s property market showing promising signs of continued growth and resilience, why not make the most of these opportunities? If you’re ready to delve into the thriving Perth property market and make informed decisions for your property investment, contact ProProperty Group today.
