Property market update: Perth, February 2021

The latest Property Outlook Report by REA showed that Perth’s strong figures in the past year were led by several key trends, including a COVID-induced mining boom, as well as a shift in demand to regional Australia due to changes in working conditions and a growing preference for bigger spaces.

And while experts are generally optimistic that Perth will continue on the road to recovery, questions are being asked about the strength of its recovery journey. REA Group’s chief economist, Nerida Conisbee noted that a number of Perth suburbs were featured in both the strongest and weakest performing suburb lists, showing that even though the capital city’s market is recovering, the recovery is not uniform. 

How did segments of Perth’s property market fare this February? 

Property values 

According to CoreLogic’s February dwelling value results, Perth recorded the strongest quarterly value increase of all capital cities, with prices surging 4.3 per cent. This was the strongest price growth since 2006.

Over the month, property values in the WA capital rose 1.5 percent. Meanwhile, dwelling values rose 4.6 per cent compared to the same period last year to a median value of $491, 795. 

Similar to the trend observed in other capital cities, houses recorded a stronger price growth than units. Median values in the city’s housing market rose 1.6 per cent on a monthly basis to a median of $513, 566. Meanwhile, the unit market saw a monthly increase of 1.2 percent to a median of  $374,053. The monthly increases brings the annual growth of the housing and unit markets in Perth to 13.2 per cent and 10 per cent respectively. 

Meanwhile, REIWA’s data puts Perth’s median sale price at $490,000.The suburbs with the biggest increases were East Fremantle (5.7 per cent), South Yunderup (5.2 per cent), Seville Grove (three per cent), Cloverdale (2.7 per cent) and Ballajura (up 2.5 per cent). Other suburbs to record median sale price growth were Wellard, Landsdale, Warnbro, Gosnells and Bayswater.

Supply and demand

The latest market indicators  point to booming conditions in Perth, with strong demand swamping market supply. Data from REIWA  showed that the capital city is experiencing an “extraordinary” decline in listing volumes, with sales listings hitting a 10-year low in February.

A total of 7,899 properties listed on reiwa.com at the end of the month, its lowest in a decade. The median time taken to sell a property was also 21 days in February 2021, down from 25 days a year earlier. “The last time we saw houses sell this fast was 2006,”  according to REIWA president Damian Collins.

The same trend is observed on a quarterly basis, with selling days and listings across Perth showing a massive decline in the quarter of December 2020. 

This marks the seventh consecutive month that listings for sale had declined in Perth.  

“This is on top of the 1.6 per cent increase in January and represents the sixth month in a row we’ve seen the index continue to climb,” Mr Collins said, adding that buyers are very active in the market and soaking up stock at a rapid pace. 

Data from Corelogic supports this observed trend, showing that over the month, total listings in Perth fell by 4.2 per cent to 20, 606 from 21, 501 in January. Compared to the same period last year, total listings declined by 14.7 per cent from 28, 867  total listings in February 2020. 

Mr Collins advised buyers to be cautious despite the pressures of FOMO (fear of missing out) influencing the Perth property market. 

“It’s a hot market and buyers are understandably feeling pressure to make a swift decision. While it’s important to act fast on a property you’re interested in, I encourage buyers to use caution and not panic buy or get themselves into a situation where they pay over and above what the property is worth,” he concluded. 

Auction rates 

Corelogic reported that only 12 homes went under the hammer in Perth, returning a final auction clearance rate of only 50 per cent.

The latest auction figures are indicating a booming market with buyers that are rearing to buy properties. But the supply is not meeting demand, causing property prices to surge and leading some experts to describe the end-February results as slightly disappointing. 

Auction Insider reported slightly more favourable figures, but branded what is usually a “Super Saturday of auctions” a “disappointment” compared to last year’s offerings over the same weekend.

According to Dr Andrew Wilson, chief economist at Archistar, vendors could be holding back with signs of lower new listing growth continuing to emerge.   

Rental market

Perth continued to lead the capital cities’ rental market, as the WA capital saw both house and unit markets record an annual rental growth above 10 per cent. Compared to the same period last year, house rents rose by 13.2 per cent while unit rents climbed 10.2 per cent. 

The latest monthly rental market figures show the extreme disparity in the country’s rental market. Building on their growth in January, Perth and Darwin are seeing tighter rental market conditions. On one hand, Sydney and Melbourne are seeing rents plunge over the last year, falling 5.3 per cent and eight per cent respectively. 

The same trend is seen in gross rental yields. Sydney and Melbourne saw record lows, while every other capital city is recording gross rental yields around the mid-4 per cent mark or higher, indicating positive cash flow opportunities are more likely in these markets. In Perth, gross rental yields in dwellings rose 4.4 per cent over the year. 

Vacancy rates

Domain’s monthly vacancy rates shows the national vacancy rate was flat at 1.9 per cent from January to February and edged up 1.7 per cent compared to the same period in the previous year.

Perth’s vacancy rate declined from 0.7 per cent in January to 0.6 per cent in February. The latest figures show a steep decline from the 1.8 per cent vacancy rate recorded in February 2020. 

"This will be a welcome boost for landlords, especially those in Perth who have seen a stark turnaround in the vacancy rate in recent years, falling from 5.0 per cent in June 2017 to a mere 0.7 per cent in February 2021,” the Domain report noted. 

The areas with the lowest vacancy rates were Perth City (1.3 per cent), Cottesloe - Claremont (1.0 per cent), South Perth (1.0 per cent), Canning (0.9 per cent) and Melville (0.8 per cent). Meanwhile, the areas with the highest vacancy rate were Wanneroo (0.2 per cent), Gosnells (0.3 per cent), Armadale (0.3 per cent), Rockingham (0.4 per cent) and Cockburn (0.4 per cent). 

Outlook

Overall, Australia’s housing market is well underway in one of the strongest growth phases on record. Looking ahead, REA Group’s chief economist, Nerida Conisbee expects the strong conditions in Perth to continue, driven by demand in the mining industry, cheap finance, strong performance across the premium property market and growing confidence in the state’s real estate.

However, the frequent closure of borders, which leads to a lack of employees, could be “a handbrake to the economy, and by extension, the housing recovery”, the chief economist noted.