Perth has emerged as the strongest-performing capital city property market in Australia, after home values jumped 10.9% in October when compared with the previous year, according to PropTrack.
This increase outpaces the historic average annual growth rate by more than five times, a clear indicator of Perth’s current market strength. But what’s driving this exceptional performance?
Perth’s relative affordability
Among the capital cities, Perth stands out for its relative affordability, even accounting for the recent growth. As a result, buyers are finding more value for their money in the city. This affordability is attracting both first-time homebuyers and investors, fuelling demand in the local market.
Strong population growth
Another significant contributor is strong population growth, with Australian Bureau of Statistics (ABS) data showing Western Australia’s population grew 2.8% over the year to March 2023, the fastest growth rate in the country.
As more people move to the city for its lifestyle, employment opportunities, and affordable housing, the demand for homes increases. This influx of new residents puts upward pressure on property prices, as the supply of homes struggles to keep pace with the growing demand.
Tight rental market
You can clearly see the impact of this influx in Perth’s rental market, which is extremely tight with a vacancy rate of just 0.4% in October, according to SQM Research.
With fewer properties available for rent, the competition for rentals has intensified, putting upward pressure on asking rents – which have soared 18.7% year-on-year for the week ending 12 November.
This situation can encourage people to consider buying a home instead of renting, as owning becomes more financially appealing. The low availability of rental properties also makes Perth attractive to property investors, who can capitalise on high rental yields and strong demand from tenants.
Low listing levels
There were just over 5,000 properties listed for sale on www.reiwa.com at the end of October, close to a 30-year low and a massive 37.4% drop on the same time last year.
With more buyers than available properties, it’s a classic seller’s market scenario. Sellers can command higher prices due to the lack of competition, which, in turn, lifts the overall market.
Why the boom is likely to continue
Looking ahead, there are strong indications that these conditions will persist.
For one thing, Western Australia’s economy is extremely strong, with ABS data showing an unemployment rate of 3.7% in October. A strong job market underpins housing demand, drawing interstate and overseas migrants, while also giving people the confidence to commit to property purchases.
For another thing, the state government is actively promoting Western Australia as a destination for skilled overseas workers. This policy will likely sustain population growth, further fuelling demand for housing in Perth.
Adding to the longevity of these market conditions is the big decline in building activity, with dwelling approvals plummeting 11.0% in September compared to August. With fewer new homes being built, the already tight supply is unlikely to ease significantly in the near future, which will likely continue to put upward pressure on property prices.
Want to buy an investment property in Perth? As an expert Perth buyer’s agent, Resolve Property Solutions can help. To discuss your options, book a free strategy call with Peter Gavalas.
