Property market update: Perth, February 2022

“REIWA members across Perth are reporting strong market conditions. We don’t anticipate the demand for property changing any time soon, especially with borders set to open this week,” Mr Collins confidently stated at the end of the month.

The city’s steady performance was mainly attributed to the low supply of available properties in the Western Australian capital being unable to keep up with the strong demand from both interstate and international buyers looking to get on Perth’s property ladder.

The source appeal for the Western Australian capital continues to be its relative affordability compared to its bigger capital counterparts, according to Mr Collins.

As the talk around housing affordability continues to ramp up with the recent release of the final housing affordability inquiry report from the House of Representatives standing committee on tax and revenue, Mr Collins said that the dream of home ownership remains “alive and well” in Western Australia.

“Despite the strong market conditions, Perth still has the most affordable median house sale price of any capital in the country,” he stated.

The local expert further explained: “In Sydney and Melbourne, their median house sale prices sit above $1 million, pushing the dream of homeownership out of reach for many people. We are lucky that owning your own home is still attainable for most people in Perth.”

He also cited a recent report by the Real Estate Institute of Australia (REIA) that showed Western Australia had the highest proportion of first home buyers in its owner-occupier market of any state or territory in the country.

REIA’s Housing Affordability Report found that in the December 2021 quarter, first home buyers made up 39.3 per cent of Western Australia’s owner-occupier market.

To put that figure into perspective, first home buyers in NSW composed just 31.1 per cent of the state’s owner-occupier market, while in South Australia, that figure was even lower at 28.3 per cent.

Domain’s latest First-Home Buyer Report backs this observation, naming Perth as the best city for first home buyers, with the time required to save a deposit for an entry-level house taking three years and seven months on average, less than half of the time taken in Sydney.

The report also highlighted that the city offers entry-buyers a much more “stable environment” in which to save a deposit and keep up with the property market.

Meanwhile, on the other side of the country, the news is grim for those dreaming of home ownership.

According to Domain, it would take eight years and one month for a couple to save a 20 per cent deposit for a house in Sydney, while Canberra has overtaken Melbourne in second place, at seven years and one month.

Domain’s chief of research and economics Dr Nicola Powell said that first home buyers faced a growing financial hurdle when it came to saving a deposit, and this became more daunting in the context of increasing living costs, low wage growth, weak savings rates and the rapid rise in property prices.

But first home buyers looking to enter Perth’s housing market had plenty of positive data in their favour.

“When you do a comparison across the major cities Perth comes out as more favourable for first home buyers – it has greater mortgage affordability, the shortest saving time for a deposit and has had the smallest increase in the time taken to save that deposit,” Dr Powell said.

She explained that the dire situation also stems from wages not keeping pace with escalating property prices.

“It’s really challenging, and affordability has been a hindrance for first-home buyers to get into the market – they haven’t been able to keep pace with that level of price growth.

“But overall the outlook is more positive for buyers in Perth which means wages growth and interest accrued on savings has kept pace with entry-level house prices.”

With the city lifting its border restrictions on 3 March, local industry figures and experts are now abuzz on how the city opening its doors after more than two years of being closed off due to the pandemic will shape Perth’s market dynamics.

But before we get into what’s in store for Perth in the coming months, let’s first take a closer look at how its market performed in February 2022.

Property values

CoreLogic reported that Perth’s average property values rose by 0.3 per cent in February, slowing down from the 0.6 per cent gain recorded in January.

Despite the modest bump in dwelling values, the figures still mark a continued recovery from the 0.1 per cent decline recorded in October 2021.

On a quarterly basis, property values are up by 1.3 per cent, edging up from the 1.2 per cent increase seen in the previous rolling three-month period.

Compared to the same period last year, property values in Perth are up by 8.6 per cent, bringing the median dwelling value to $535,335. This indicates an increase of more than $4,000 month-on-month.

The city’s dwelling values remain one of the lowest in the country, with prices in Perth only surpassing that of Darwin’s $495,573. Perth’s price point also strikes a dramatic contrast with Sydney’s $1,116,219, Melbourne’s $799,756 and Brisbane’s $722,433.

Median values for houses in Perth rose 0.3 per cent over the month, partly reversing some of the 0.7 per cent increase recorded in January.

Compared to the same period last year, Perth house prices have risen by 8.7 per cent, with the average house in the city now selling for $559,837. The figures indicate an almost $5,000 increase in median prices on a monthly basis.

Meanwhile, the city’s unit sector eked out a 0.1 per cent increase over the month, a slight improvement compared to its no-movement performance in January.

Compared to February 2021, Perth’s unit prices are now up 7.7 per cent, with the city’s units now selling for an average of $401,859. Over the month, median unit prices have risen by almost $2,000.

Data from REIWA showed Perth’s median house sale price was $525,000 in February.

The suburbs to see the biggest increase in median house sale price growth during the month were Mount Nasura (up 3.1 per cent to $490,000), Nedlands (up 2.4 per cent to $2.1 million), Meadow Springs (up 2 per cent to $430,000), Hammond Park (up 1.9 per cent to $525,000) and Hamersley (up 1.8 per cent to $565,000), according to REIWA.

Other big movers during the period were Dawesville, Ocean Reef, Cooloongup, Coolbellup and East Victoria Park.

Supply and demand

Perth’s property market continued to reel from supply shortage issues, as the city saw the smallest gain in listings among capital cities during February.

SQM Research’s latest data revealed that total property listings in the city saw a 0.6 per cent increase over the month to 21,128 from 21,004 in January.

The small increase in the number of available properties was attributed by SQM to supply strongly outpacing the strong demand in the city’s market.

Meanwhile, Perth’s listings are up by 2.5 per cent year-on-year – one of the few cities to see an annual increase in listings aside from Darwin and Sydney.

Perth’s new listings (or properties that have been on the market less than 30 days) saw a 43 per cent increase over the month from 5,143 to 7,356. Year on year, listings are also up by 18.7 per cent.

Meanwhile, data showed that old listings or property listings over 180 days rose by 2 per cent from 3,717 in January to 3,793 in February. On an annual basis, old listings have fallen by 31.5 per cent, indicating strong absorption rates.

REIWA reported that there were 7,892 properties for sale at the end of February, lower than the 8,245 properties recorded in the previous month and 13 per cent lower than the end of November 2021.

Weighing in on the figures, Mr Collins said: “With interstate and overseas migration expected to increase considerably once borders open, we anticipate competition amongst buyers will intensify which will put downward pressure on listing stock.”

Meanwhile, the median time to sell a house during February was 16 days, which is the same as January and three days faster than the same period last year.

During the month, the fastest-selling suburbs were Tapping (six days), Coolbellup, Cooloongup, Greenwood and Harrisdale (all seven days).

Other suburbs that saw fast median selling times were Carramar, Currambine, Bayswater, Atwell and Craigie.

Experts are predicting a surge in demand as Western Australia reopens its borders, particularly from foreign buyers looking to make a move to the great Down Under.

Domain reported that based on data between January 2021 and February 2022, the inner-city suburbs of South Perth, East Perth, and Como were some of the most viewed listings, with prospective buyers revealed to be mostly from New Zealand, Singapore, Hong Kong and the US.

According to Dr Powell, the extended state border closures had hampered an element of housing demand in the city, disrupting the flow of new residents into the state.

The expert noted some overseas-based buyers were looking for larger homes and a better lifestyle after being in coronavirus-related lockdowns in apartments in large cities such as Singapore.

“Now borders are open, this could provide another wave of new demand, freely allowing an easier relocation from overseas and interstate,” she said.

Auction markets

CoreLogic reported that throughout February, there were 96 properties that went under the hammer in Perth, with 60.5 per cent resulting in a sale.

If you want to be in the loop about what’s happening across auction markets in the country, follow our weekly updates in our News section.

Rental market

REIWA’s data showed Perth’s weekly rent price averaged $450 during February, unchanged from January and the third consecutive month at rent prices held steady.

“It should reassure tenants that even though demand for rentals is strong, rent prices are not growing at unsustainable levels,” Mr Collins said.

REIWA reported that the suburbs to record the biggest increase in median rent during the month were Yokine (up $15 to $475 per week), Rockingham (up $10 to $390 per week), Scarborough (up $15 to $595 per week), Ellenbrook (up $10 to $420 per week), and Yanchep (up $10 to $450 per week).

Other suburbs to record strong increases were Aveley, Balga, Piara Waters, Doubleview, and Duncraig.

In terms of leasing time, it took an average of 16 days for a rental property to be taken off the market during February, similar to the number of days seen in the previous month and three days faster than the same period last year.

The suburbs that recorded the fastest median leasing times during February were Yanchep (12 days), Alkimos (13 days), Meadow Springs (13 days), Yokine (13 days) and Byford (14 days).

Other suburbs to experience fast median leasing times were Como, Maylands, Nedlands, Duncraig and Queens Park.

On the supply side, REIWA reported there were 2,319 properties for rent at the end of February, at par with figures seen in January.

“With borders opening this week we are likely to see increased competition for rentals from interstate and overseas arrivals who are competing with locals for accommodation,” Mr Collins said.

“This will exacerbate the rental shortage in the short term but is a necessary step towards increasing investment in the state, attracting skilled workers to help complete construction and bringing balance back to the market,” he added.

Despite optimism from some local experts that the city’s rental market will eventually rebalance, there are industry commentators sounding the alarm that the city’s rental crisis will morph into a catastrophe when the Western Australian border control drops.

State government forecasts released in December predicted Western Australia’s population would grow by 1 per cent in 2022-2023 (26,800 people), 1.3 per cent in 2023-2024 (34,840 people), and 1.4 per cent in 2024-2025 (37,520 people).

Meanwhile, industry insiders predict anywhere from 20,000 to 80,000 interstate and overseas migrants will be competing over only 10,000 properties in the months after reopening.

Commenting on how these figures could affect the rental market, Garth Davis, the owner of Property Powerhouse, said Western Australia needed out-of-the-box ideas to mitigate a catastrophic shortfall in rentals.

“Assuming that 30,000 families try to rent, and there are only 2,000 properties to rent, we will have a major rental shortfall catastrophe,” he said.

“Rents are already going at $100 per week above asking price in this market ... rents will be going at $200 to $400 per week above the asking rent ... ridiculously high levels of unaffordability.”

He further called on the state’s government to roll out measures to ease the tight market conditions, such as incentivising residents with extra or unused bedrooms to offer them as short-term rentals.

But according to Steven Rowley, the director of Curtin University’s Australian Housing and Urban Research Institute, rental market doomsayers have significant hindsight in their equations when giving forecasts.

“Obviously there will be some people coming, but also there will be some people leaving,” Professor Rowley stated.

“Nobody talks about the net impact ... nobody can accurately forecast that. It could be a lot less.”

However, the expert conceded that there is an existing issue with rental stock, and any positive net flow into the state would put further pressure on that.

“I don’t think we can call it a catastrophe yet,” he said. “But clearly the market is in a serious situation.”

Vacancy rates

Domain’s latest vacancy report further painted Perth’s rental market as struggling to keep up with demand, as the city’s vacancy rate hit record lows in February.

Domain reported that the Western Australian capital’s vacancy rate fell to a historic low of 0.5 per cent in February, declining from the already tight 0.6 per cent rate seen in the previous month.

The areas with the highest vacancy rates were Perth City (1 per cent), Cottesloe – Claremont (0.9 per cent), Canning (0.7 per cent), Joondalup (0.6 per cent), and Mandurah (0.5 per cent).

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

With the city at its lowest-recorded vacancy rate since 2017, Domain forecasts that the lifting of strict Western Australian border controls in March could see the rental market tighten further.

Outlook for Perth’s market

As Western Australia loses its “Fortress WA” title with the reopening of its interstate and international border at the start of March, how will Perth’s property market react?

While the majority of capital city markets are seen to face slowing growth in the coming months, most experts are optimistic that Perth will get a second wind from the reopening and forecast an uptick in values for the remainder of 2022.

Ryan Thompson, the director of the Western Australia-based real estate firm Real Estate Brilliance, said that with Perth already struggling to keep up with demand, it is only expected that prices will skyrocket as soon as borders open.

“I am told there has been permission given to 30,000 people to return or come to Perth from March and there are another 50,000 awaiting approval,” Mr Thompson said.

As these figures are expected to translate into more demand for housing, he forecast: “You [buyers] won’t be able to get a property for love or money and I can see sale listings drop down to 3,000, which we’ve never seen before.”

Mr Thompson said he expects a gain of at least 10 to 20 per cent on house prices or even double these percentages as more people flock into the state.

Knight Frank’s head of Western Australia Craig Dawson welcomed the easing of border restrictions, claiming it will have a positive impact on the state’s commercial property market.

“We expect more vendors to list their properties as it is anticipated there will be a bigger buyer pool with more people able to come into Perth,” he stated.

According to Mr Dawson, the higher-value central business district office buildings market bore the brunt of border closure as properties were left unsold as buyers of the asset class were locked out of the state.

With Western Australia lifting its ironclad borders as the threat of the pandemic recedes, Mr Dawson said investors are now flocking in, ready to take advantage of the state’s strong market conditions.

“We expect there will be an influx of investors coming to look at properties in WA, not only because they physically can now, but because of the economic strength of our state,” he said.

Erring on the side of caution, Ray White chief economist Nerida Conisbee warned that there are also headwinds that could slow down the market, such as looming interest rate rise, surging construction costs that could limit the amount of new building activity, and rising rents.

“We’re not going to see these galloping rates of growth we were seeing,” Ms Conisbee said.

While this could spell bad tidings for sellers, the expert said this would be welcome news for buyers.

“A calmer market is a better market for a lot of people, and first-home buyers are one of them,” she surmised.

To get more insights about Perth’s property market, be sure to check out Smart Property Investment’s podcast network! Also, make sure to head on to the News section for the latest property market reports, insights, news and useful tips and strategies for investors.

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