Property market update: Perth, December 2021

While the Western Australian capital ranked last among its capital city peers in terms of annual gains, Real Estate Institute for Western Australia’s (REIWA) chief executive Damian Collins reiterated that the city’s property market was firmly in recovery. 

The local expert attributed the city’s solid market conditions to a combination of strong demand outstripping supply and a robust economy that remained relatively unscathed by the pandemic. 

“2021 saw a remarkable resurgence in the Perth property market, with low stock levels and strong buyer demand fuelling price growth,” Mr Collins said.

He also highlighted that despite the strong price growth recorded in 2021, the city’s more affordable property prices compared to other cities continue to be the biggest drawcard for people choosing to live and invest in Perth.

Jennifer Wakeman, the general manager of Momentum Wealth, echoed Mr Collin’s observation. She noted that while Perth’s price growth had been strong in 2021, buyers will find the city to be an affordable option compared to other capital markets. 

“The city’s median home value currently lies at $528,551 according to CoreLogic, which is well below the median of $793,658 across Australia’s combined state capitals,” Ms Wakeman said.

“To put this affordability into perspective, the latest figures from the Real Estate Institute of Australia show it takes just 26.3 per cent of family income to service average mortgage repayments in Western Australia, compared to 44.7 per cent in NSW and 37.2 per cent in Victoria.”

Given the city’s affordability, Mr Collins is optimistic that Perth still has room to grow. “We are the cheapest of any of the states to buy property. So given how affordable we are, we have some capacity in the system to absorb price increases,” he said.

Meanwhile, CoreLogic called attention to the city’s growth stagnating since hitting a peak mid-way through 2021. 

CoreLogic said that property price growth within the state’s ironclad borders has now entered the slow lane, in what it claims to be a “two-speed property market” that emerged across the capital cities in recent months. Other cities described to be in this position are Melbourne and Sydney, which also saw a drop off in growth during the second half of the year. 

Unlike in Melbourne and Sydney, where rising prices are putting pressure on home buyers and dampening growth, the slower conditions across the Perth housing market may be more attributable to the disruption to interstate migration caused by extended closed state borders, which hurt demand, according to CoreLogic. 

With this all in mind, what are experts’ predictions for the Western Australian capital in 2022? For now, let’s see how Perth closed out 2021. 

Property values 

The latest data from CoreLogic showed that dwelling values in the city edged up by 0.4 per cent in December, twice the monthly gain seen in November. 

Perth closed out the year with a 13.1 per cent annual increase, bringing the median values in the city to $528,551. 

The figures make Perth the cheapest capital city after Darwin, which had an average dwelling value of $498,168 at the end of the year. 

According to CoreLogic, median values for houses in Perth rose 0.4 per cent over the month, and the current median value for a house in the city now sits at $553,013. Compared to the same period last year, Perth house prices have risen by 13.3 per cent. 

On the other hand, Perth’s unit market saw no price movement during the same period. Median unit values in the city now sit at $400,711. Compared to December 2020, Perth’s unit prices are now up 10.9 per cent. 

Meanwhile, data from REIWA showed Perth’s median house sale price was $520,000 in December, with 83 suburbs notching up price growth during the month. 

The suburbs to record the biggest median house sale price growth during the month were Applecross (up 6.2 per cent to $1.7 million), Kalamunda (up 4.9 per cent to $710,000), Wannanup (up 3.4 per cent to $585,000), Mandurah (up 3.2 per cent to $310,000) and Beckenham (up 3 per cent to $422,500).

Other suburbs to perform well were Cooloongup, Kardinya, East Victoria Park, Doubleview and Safety Bay.

REIWA also compiled a list of the 10 best suburbs in Perth that managed to exceed the city’s average growth on a year-to-year basis. 

Of the 10 suburbs, five reportedly had median house sale prices above $1 million, with three of those tipping over the $1 million mark in 2021. 

“2021 was a big year for the Perth property market overall and an even bigger year for these 10 best-performing suburbs, with each recording 25 per cent or more price growth in just 12 months,” Mr Collins said. 

For a full breakdown of the list, make sure to read our article on the top 10 Perth suburbs for price growth. 

Supply and demand  

According to SQM Research, the city’s total residential listings fell in December by 2.4 per cent to 21,887 from 22,407 in the previous month. Compared to 12 months ago, listings are up by 1.8 per cent from 21,478. 

New listings or properties that have been on the market less than 30 days in Perth saw a 32.6 per cent decline over the month to 5,733 from 8,510 in November.  Over the year, new listings in the city are up by 15.5 per cent.  

Data also showed that old listings or property listings over 180 days rose by 1.9 per cent from 3,768 to 3,838 month-on-month. Compared to 12 months ago, old listings have fallen by 33.9 per cent. 

Meanwhile, REIWA reported that there were 8,511 properties for sale at the end of December, which is 7 per cent less than the previous month.

“We saw a notable decline in listings for sale at the end of December compared to November, which is very typical for this time of year as sellers choose to defer listings over the holiday period,” Mr Collins said.

On an annual basis, listings for sale were 4 per cent higher than they were at the end of December 2020.

The median time to sell a house during December was 14 days, which is the same number of days in November and seven days faster than December 2020.

Mr Collins said the average selling time was proof of the strong demand for housing in the city. “Properties are selling very fast in Perth, with buyers needing to act quickly and competitively to ensure they secure a property,” he said. 

The fastest-selling suburbs in December were Kingsley (six days), Coolbellup (seven days), Floreat (seven days), Greenwood (seven days) and Heathridge (seven days).

Other suburbs to record fast median selling times were Leeming, Tapping, Ocean Reef, Bull Creek and Greenfields. 

Auction rates  

According to CoreLogic, 84 properties in Perth went under the hammer during the first three weeks in December, with an average clearance rate of 42.2 per cent. 

During the last week of the month, a total of 10 properties were scheduled to go under the hammer. 

For more updates, expert industry insights and stories about Australia’s auction markets, follow our weekly updates in our News section. 

Rental market 

Perth’s rental market continued to be a frontrunner among capital city markets at the end of 2021 and is seen to continue operating as a landlord’s market in 2022. 

Domain’s latest rental report showed that Perth house rents reached their highest point in seven years, rising by 2.2 per cent or $10 over the December quarter to a weekly average of $460. 

On an annual basis, Perth was the third-best performing city, with a 10.8 per cent increase, behind only Brisbane and Canberra (with 12.9 and 12.5 per cent, respectively). 

Meanwhile, unit rents increased another $10 or 2.6 per cent over the quarter to $390 a week. Compared to the same period last year, unit rents are up 11.4 per cent from $350 in December 2020. 

At the end of December, gross rental yields for houses and units in Perth stood at 5.20 per cent and 5.76 per cent, respectively. 

The report noted that it is typical to see a seasonal lift in asking rents as the market enters the busiest rental changeover period and landlords adjust to current market rates. 

Domain described the Western Australian capital as one of the most competitive capital cities for tenants supporting rent increases.

REIWA also reported a $5 increase in Perth’s median rent price to $445 per week in December.

Despite the further tightening in the city’s rental market, Mr Collins claims a city remains an affordable option for tenants. 

“Even though rents experienced a small increase during the month, they are still more affordable than they were in 2014 and WA tenants continue to enjoy the most affordable rents in the country,” Mr Collins said.

The suburbs to record the biggest increase in median rent during December were Balcatta (up $30 to $450 per week), Aubin Grove (up $30 to $480 per week), Rivervale (up $25 to $450 per week), Waikiki (up $20 to $400 per week) and Yanchep (up $20 to $420 per week).

Other suburbs to record strong rent increases were Queens Park, Seville Grove, Riverton, Harrisdale and Morley.

In terms of leasing time, REIWA reported that it took a median of 16 days to lease a rental during December, which was the same as November and one day faster than December 2020.

The suburbs that recorded the fastest median leasing times during December were Secret Harbour (12 days), Wellard (12 days), Innaloo (13 days), Kelmscott (13 days) and Hamilton Hill (13 days).

Other suburbs to experience fast median leasing times were Scarborough, Yanchep, Alkimos, Armadale and Butler.

Perth also continued to face a rental shortage, with a total of 1,846 properties listed as vacant at the end of the month. 

“The rental shortage continues to be the biggest issue facing the Perth rental market. We need more investors in the market to help keep up with tenant demand, which will only increase once borders open and migration resumes,” Mr Collins.

“It is critical that the WA government does not make major changes to the Residential Tenancies Act that will discourage property investment in WA at a time when we desperately need an influx of rental stock,” he noted. 

While tenants will find it a hard task to secure a rental property in Perth this year, Momentum Wealth says it is a good time for investors to enter the market. 

“Rental listings are likely to remain below historical averages, yet tenant demand will remain high. This will likely see rents continue to climb higher in 2022,” Ms Wakeman said.

The expert added: “The upshot is that the Perth market offers outstanding potential for investors especially in the current climate of affordable values and historically low interest rates.”

Vacancy rates 

Domain reported that Perth’s vacancy rates rose by 0.1 basis points to 0.6 per cent in December. Compared to the same period last year, vacancy rates in the city have declined from 0.9 per cent. 

Despite the monthly increase, the city’s vacancy rates were still historically lower than in previous years.

During the month, the areas with the highest vacancy rates were Perth City (0.9 per cent), Joondalup (0.8 per cent), Cottesloe – Claremont (0.8 per cent), Fremantle (0.7 per cent), Belmont – Victoria Park (0.7 per cent). 

Meanwhile, the areas with the lowest vacancy rates were Serpentine – Jarrahdale (0.2 per cent), Kwinana (0.2 per cent), Kalamunda (0.2 per cent), Mundaring (0.3 per cent), and Cockburn (0.4 per cent).  

What will 2022 bring for Perth’s property market? 

In recent weeks, most industry players agreed that the biggest boost to Perth’s residential market would come from the much-awaited reopening of Western Australia’s borders to vaccinated travellers.

Experts predicted that the increased movement in the state would have a knock-on effect on property values, with the influx of people seen to drive a flurry of activity and provide a shot in the arm for the city’s real estate market.  

However, the expected rebound in market activity will need to take a raincheck, as Western Australian Premier Mark McGowan postponed the planned border reopening indefinitely amid the recent Omicron outbreak in the country. 

Mr Collins said that as a result of the delay, Perth’s market condition would continue to be tight. 

He noted that the Western Australian market is currently struggling to keep up with demand for homes, with a skills shortage causing significant construction issues and building delays. He added that the only way to ease the shortage was to build more houses. 

To do this, he said that skilled migrants are needed, either from interstate or overseas. He also pointed out that house construction is taking twice longer due to the acute labour shortage and supply chain issues.

Mr Collins said the current arrivals quota is going to result in negative long-term problems with housing across the state. “We certainly need more people coming into the state and with the closed borders that’s very challenging to do,” he added. 

Despite the short-term setbacks, Mr Collins is confident that Perth will deliver double-digit growth in 2022, given its strong market conditions. 

“The strong demand, the strong economy, the limited supply, all of that points to – barring anything outside of the ordinary and the economy remains strong – to [a] pretty decent price growth of 10 per cent next year,” he forecast.

The big four’s forecasts for Perth’s housing market also look relatively promising, although there is a widespread of predictions. 

Westpac expects the city’s values to rise another 8 per cent in 2022, stating that the drop off in growth seen since mid-year is “hard to reconcile with the wider market picture, suggesting it may prove to be transitory.” 

NAB recently upgraded its 2022 forecast for Perth to 3.9 per cent, while both CommBank and ANZ are putting their bets on the city recording a 3 per cent growth this year. 

Meanwhile, SQM Research’s Louis Christopher forecasts up to 6 per cent annual growth, stating: “Perth housing prices are still below where they stood in 2010, offering the second-best value (next to Adelaide) of any Australian capital city when comparing rents to prices or indeed wages to prices.”  

For an insider’s look into Perth’s property market, make sure to check out the latest episode of the SPI Show on our podcast network. You can also read our article on why Perth’s market is a recipe for gains in 2022.  

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