It’s official: Perth is Australia’s top-performing property market.
In the 12 months to 31 December 2023, the median property value across our city rose an eye watering 15.2%, according to CoreLogic, so that it now stands at $660,754.
But our city’s extraordinary growth wasn’t limited to the sales market. Perth was also the fastest growing rental market in the country of any capital city, with CoreLogic also reporting the median rose 16.5% across the year, or by approximately $80 a week.
For investors, this also meant our city returned the highest median yield of any major metropolitan centre, at 4.6%.
But can we expect 2024 to bring more of the same, or will surging rents and prices finally come to an end? We explore what’s in store for Perth’s real estate market over 2024, by comparing today with previous growth cycles.
Putting Perth’s property market in perspective
2023 wasn’t the only year we’ve seen prices rise sharply. In 2021, our city’s median dwelling value lifted 14.5%, in the midst of a COVID property boom. This was followed by a more modest rise of 3.6% in 2022.
That means, all up, Perth prices have risen 40.2% since December 2020 from $471,310 to $660,754.
When prices rise by that much that quickly, it’s safe to assume we’re in the midst of a property boom. In fact, you have to go all the way back to 2009 (when Perth property prices rose by 11.3%) to find the next most recent year Perth recorded double digit growth. And we haven’t had faster growth than 2023’s in a calendar year since 2006, when Perth property prices rose by almost a third in just 12 months.
Perth property performed so well in 2023 that the pace of price growth here was also more than four times faster than Melbourne (3.5%) and almost double that of Adelaide (8.8%). It also outstripped the next two fastest growing markets, Brisbane (13.1%) and Sydney (11.1%) by some margin.
That said, property prices in our city haven’t always performed as well as in other major capitals over the past couple of decades. In fact, our market has underperformed for some time.
Back in 2006, Perth was vying for Sydney for the title of Australia’s most expensive housing market. Fast forward to today, and Perth’s median property price is less than 60% of Sydney’s.
Why do Perth property prices rise so quickly?
One of the key reasons that Perth’s market has diverged from the rest of the country is that our city often has different drivers from the eastern state capitals, so it doesn’t always act in unison with them.
Our massive property growth cycle from around 2001 to 2006 and also the milder growth cycle of 2009 to 2013 were the result of mining booms and high commodity prices, which brought unprecedented migration into WA.
As the Sydney Morning Herald wrote in 2006: “Perth is the nerve centre of the China-fuelled resources boom and house prices there have almost directly tracked the rise in commodity prices.”
It also noted that “Apartments in Sydney lost 2.9 per cent of their value last year while Perth apartments added 31.4 per cent.”
During this period, our city’s population was growing by around 3% a year, and each new arrival needed somewhere to live – putting real pressure on dwelling values, as well as the rental market.
At the same time, we were seeing labour shortages and record wage growth, which meant people who needed a home had more money to spend on it.
Comparing that with today
Fast forward to today and it actually seems many of the same circumstances exist now that did back then.
After years of lagging Victoria and Queensland, WA is again Australia’s fastest growing state with our population lifting 3.1% in the year to 30 June 2023. WA’s average earnings are again the highest in the country (we were overtaken by the ACT for a while) and, as any business owner will tell you, we’re once again facing skilled labour shortages.
At the same time as this happens, the number of properties on the market is lagging well behind demand – both in the sales and rental markets. SQM Research shows that the number of rental properties available across the Perth metro has been falling since 2020, at the same time as the population has been growing.
The number of properties for sale has also been falling over the same period, with listings in November 2023, 37% lower than at the same time five years previously.
As we’ve noted previously, the influx of new arrivals and the lack of stock on the market is fuelling a genuine rental crisis, with the vacancy rate sitting at just 0.7% for over two years now.
That said, there are some differences between today and Perth’s previous boom markets. Both our population and our economy are far more diverse today than a decade ago. Rising interest rates have also dented people’s borrowing capacity (although affordability is not the same issue here as in other Australian capitals).
Importantly, our property tastes are beginning to change too. Previously, as our population grew, so did the limits of our city – so much so that we’re now the world’s longest city, with more than a 150 km drive from north to south.
The next wave of growth is likely to be accompanied by higher density buildings closer to the CBD, with smaller blocks, townhomes and apartments becoming more common.
The ingredients for a strong 2024
For investors and property buyers, however, the fundamentals of the Perth property market look strong. Demand continues to outsrip supply, the state economy is set for continued growth, and strong migration levels seem likely to continue.
All of this will continue to put pressure on sales prices, as well as the rental market.
What’s more, Perth’s high incomes and relative affordability means home buyers and tenants won’t face the same cost of living pressures as many in other states.
This means that, unlike many other parts of the country, there is still genuine capacity for growth, even if interest rates remain high for some time.
With that in mind, our advice is that 2024 should be another great year for Perth’s property market, and that anyone looking to invest should do so sooner rather than later.
After all, when Perth property prices rise they tend to rise fast. In the three years to 2006, the median home value in our city almost doubled. Who’s to say we won’t see a similar rise over the next couple of years…
Are you looking to invest in Perth real estate, rent out your Perth property or find your next Perth rental home? We can help. Get in touch with our specialist Perth rental team today.