Property market update: Perth, March 2021

In the first few months of 2021, Perth found itself under the spotlight, emerging as a fan favourite among property investors. Its newfound fame is attributed to the timing of the market and its forecasted price growth. Momentum Wealth’s 2021 Property Sentiment Report showed a jump in Perth’s popularity with as many as 48 per cent of surveyed investors naming Perth as the best location to purchase an investment property.

Other factors driving Perth’s growth in popularity include the uptick in the mining sector and the flow-on effects to the economy, as well as Western Australia’s relative safety from the COVID-19 pandemic. 

Nu Wealth’s managing director, Daniel McQuillan, also cited “buyers’ fright” as one of the main reasons behind Perth’s subdued recovery.

But despite showcasing resilience during the pandemic, with dwelling prices and migration surging, Perth is still yet to come close to investor interest levels observed during the last property market boom, McQuillan said. In fact, CoreLogic data showed that monthly price growth in the WA capital is still below its 2014 level. 

How did Perth fare in March 2021? 

Property values

CoreLogic’s national home value index has recorded its fastest rate of appreciation in over 30 years, with capital cities reclaiming their position as frontrunners, having been outpaced by regional markets for months.

Data showed that out of the eight capital cities, six cities rose to hit a new record-high value, bringing the national home value index 5.6 above its previous market high of October 2017. 

However, Perth and Darwin’s median dwelling values were significantly below their record highs from 2014. Perth lagged behind by 15.9 percent, while Darwin’s median housing values was 21.6 per cent below their prior peaks. 

Nonetheless, the WA capital still posted a strong growth figure, rising 1.8 per cent over the month and 5 per cent during the first quarter of 2021. At an annual rate, dwelling values in Perth rose 6 per cent to stand at a median price of $505,850.   

In March, the unit market continued to lag behind the housing market in terms of growth. Figures from CoreLogic showed that average house prices in Perth rose 1.8 per cent month-on-month and 6.3 per cent year-to-year in March. This brought the median value of houses in the WA capital to stand at $527,833. 

Looking at the monthly data, the unit market was not significantly far behind, recording a 1.7 per cent increase. However, annual growth remained weak, as unit prices rose by only 4.0 per cent over the 12-month period up to March to a median value of $385,265.  

Supply and demand  

Experts are citing the low supply and strong demand as the main driver of the recent housing boom, as a sense of FOMO amongst buyers is causing them to rush to secure a property.

Perth was one of the few capital cities to buck the national trend of declining monthly listings, recording an increase of 3.4 per cent increase from 20, 606 in February to 21, 300 in March. Despite the monthly increase, total listings are still down 9.7 per cent compared to the same period last year. 

In a sign that absorption rates are increasing, and stock is clearing, SQM reported that listings over 180 days declined 5.6 per cent for the month and are down 32.5 per cent compared to the same time last year, with listings declining in all capital cities. 

Demand for properties in Perth is not showing signs of slowing down. In fact, a report from REIWA showed that properties in Perth are selling the quickest they have since 2006, with the median selling time down by 26 days in just 12 months. Properties in the WA capital are selling at the fastest pace in 15 years, with the average time in March down to just 17 days, well below the 43 days seen in March 2020.

“Perth is a seller’s market at the moment and buyers are facing a lot of competition to secure a property, which is reflected in how quickly we are seeing properties sell,” said REIWA president Damian Collins

On the supply side, the report showed that listings are down as stock dries up across the WA capital. On reiwa.com, total listings sat at 8,247 at the end of March, indicating a decline of 32.9 per cent compared with the same period last year.

Auction markets 

In another indication of tight market conditions, the clearance rates across capital cities stood at 84.4 per cent for the 3,289 properties that went under the hammer in the last week of March. 

This is a far cry from the final clearance rate of just 37.3 per cent was recorded across the combined capitals in the  week in 2020, as withdrawal rates surged amid COVID-19-related restrictions. Overall, this was the busiest auction week since the week prior to Easter in 2018, when 3,990 capital city homes were taken to auction.

Corelogic data showed that 32 properties in Perth auctioned during the period, with a clearance rate of 66.7 per cent. 

Archistar’s most recent My Housing Market report found that all capital cities recorded sharp inclines in the median price of houses sold at auction over the year ending March 2021.

“Home auction markets have soared to record highs over March, reflecting unprecedented buyer demand for available property,” said Archistar chief economist Dr Andrew Wilson.

“No surprise that strong buyer competition has resulted in surging auction prices, also now at record highs and clearly set to go higher.”

Vacancy rates 

The WA capital’s  vacancy rate held steady in March from February at 0.7 per cent, according to Domain.  Data from Archistar’s latest National Home Rental Market Report also showed the city's vacancy rate across both units and houses stood at 1.1 per cent during the month. 

“Unit vacancy rates also remain tight in most capitals, with the notable exception of Melbourne and Sydney where record-level inner-city apartment vacancies have resulted in sharply falling rents,” Dr Wilson said.

According to Domain, the areas with the highest vacancy rates in Perth  were Perth City (1.4 per cent), Cottesloe-Claremont (1.2 per cent), South Perth (0.8 per cent), Canning (0.8 per cent) and Melville  (0.8 per cent). Meanwhile, Wanneroo, Gosnells,  Kwinana, Armadale at 0.3 per cent and Stirling with 0.4 per cent had the lowest vacancy rate. 

A shift in rentals and a surge in vacant properties are expected in the coming weeks, as significant changes to the government’s JobKeeper and Jobseeker programs at the end of March are seen to hurt the ability of tenants to pay their rent. 

Changes in the rental market could also be triggered by the end of rental moratoriums across several states.  In Perth, tenants have been protected from increasing rents at a time the rental market has tightened significantly, resulting in a portion of tenants paying well below market rate. The ending of the moratorium in WA is seen to prompt a shift in the rental market as tenants adjust to find a rental that fits their budget. Domain forecasts that asking rents will surge in response to tighter conditions, the ending of the rental moratorium and higher demand.

Rental market 

The declining rental vacancies are putting upward pressure on rents, according to Archistar’s latest National Home Rental Market Report for March 2021. 

Perth took the lead in rental price growth, recording the biggest gains among capital cities for both the housing and unit market.  For houses, rental prices in Perth rose 21.6 per cent over the year to $450.  The WA capital also took the lead in units,  with a 14.3 per cent annual increase to $420. 

Looking ahead, housing shortages and higher rents will continue to be evident across most capitals, including Brisbane, Dr Wilson said.

With housing values rising faster than rents, gross rental yields have been trending lower. In March, gross rental yields in Perth were favourable compared to Sydney and Melbourne at 4.4 per cent. 

Outlook 

Experts continue to be bullish about their outlook on Perth. In its most recent forecast report, Westpac said it expects house prices in the WA capital to climb to  12 per cent this year before slowing down to 8 per cent in 2022. 

ANZ economists’ forecast is one of the most bullish yet, upgrading its forecast to 19 per cent price growth in 2021.This is higher than the bank’s expected 17 per cent jump in house prices nationally, which it upgraded in March from an earlier forecast of just 9 per cent. The latest forecast also exceeds Commonwealth Bank’s predicted 8 per cent increase  this year.