Are you curious about what’s in store for Perth’s property market over the next 18 months?
Well, KPMG’s most recent property market forecast paints an optimistic picture for the city, with the accountancy firm predicting:
- House prices will jump 8.4% year-on-year by June 2024, followed by an 8.8% rise in the year to June 2025
- Unit prices will grow 3.9% by June, with another 1.8% expected in the following financial year
But what’s driving these numbers?
Let’s dig into the key supply and demand factors at play.
Supply factors
Perth is in the midst of a housing supply crunch, with listings for sale dropping to their lowest level in 30 years in September, according to the Real Estate Institute of Western Australia.
At the same time, Perth is also one of the most competitive cities for tenants in Australia, with a citywide vacancy rate of just 0.3% in September, according to Domain.
According to KPMG chief economist Dr Brendan Rynne, limited availability of land, falling approval rates for new developments and slower construction activity due to increased costs are all limiting the number of new homes coming into the market.
“Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains in most markets during FY24,” he said.
Demand factors
Migration
The resumption of migration post-pandemic is a considerable demand-side factor, with KPMG forecasting that Australia can expect over 400,000 migrants this year.
This influx will inevitably drive demand for housing, making the existing supply constraints more pronounced.
High rental costs
With house and unit rents in Perth hitting record highs during the September quarter, renting is becoming less affordable. As a result, more people are considering homeownership as a viable long-term option.
Interest rate cuts
Market commentators increasingly anticipate interest rates moving into financial year 2025. Lower interest rates make borrowing cheaper, encouraging more people to buy homes, and ultimately fueling price growth.
Foreign investment
Foreign investment in Australian real estate is picking up again, particularly with travel restrictions easing and China’s borders reopening. This external demand adds another layer of pressure on the already constrained housing supply.
Lifestyle changes
The longer-term shift towards remote work is leading to increased demand for bigger, more comfortable living spaces, impacting property prices.
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