Property market update: Perth, May 2022

Real Estate Institute of Western Australia (REIWA) president Damian Collins stated that the city’s market conditions during the first five months of 2022 had been strong, with the Perth property market outperforming Sydney and Melbourne for price growth. 

“May was another solid month of growth for the Perth property market, which is an encouraging sign that the recent increase to the cash rate has not stifled demand,” Mr Collins said. 

The city’s continued growth streak comes as bigger cities grapple with declining growth, stemming from a detrimental mix of poor affordability in housing markets, rising mortgage rates, a glut in listings, a change in spending away from housing and a decline in home buyer confidence. 

The recent move by the Reserve Bank of Australia to lift the cash rate from its current rate of 0.35 per cent to 0.85 per cent during its June meeting also caused most economists to reinforce their forecasts that steep declines in prices are inevitable this year, bringing on weaker demand.  

But according to Mr Collins, REIWA has not observed any slowdown from the interest rate rise so far. 

“In fact, we have seen the opposite, with more people making a decision to buy before rates rise further,” he commented. 

Mr Collins highlighted that Perth’s strength continued to be underpinned by the strong demand and supply dynamics in the market, which dulled down the impact of softening market conditions on property prices.

“Based on what we’ve seen so far this year, Perth is on track to achieve REIWA’s forecasted 10 per cent price growth by the end of the year,” Mr Collins said.

He further forecast that a housing shortage would keep Perth on track for double-digit price growth this year.

The local expert pointed out that Perth already had a shortage of 8,000 homes by the end of May, which was partly responsible for the rental crisis.

He forecast a shortage of 20,000 homes within four years, based on the slow rate of construction and the state government’s forecast population growth.

Mr Collins acknowledged that there are factors that could derail the city’s growth, but he remained steadfast in his belief that Perth will weather out any headwinds. 

“Of course, anything can happen which could change sentiment, but we have a significant shortage of properties for sale and for rent and demand remains strong which will continue to translate to price growth,” he stated.

Will Perth continue to cut a strong figure amid weakening markets in the coming months? Or will the West Australian capital also feel the chill from the recent rate hikes come winter?

For now, let’s see how Perth’s market performed in May 2022.

Property values 

CoreLogic’s latest data showed Perth’s growth streak continued in May, recording a 0.6 per cent over the month. 

While the figures mark the fifth consecutive month of growth for the city, it is down from the 1.1 per cent increase recorded in April. 

On a quarterly basis, property values in the West Australian capital are up by 2.7 per cent, up from the 2.4 per cent growth recorded in the previous rolling three-month period. 

CoreLogic’s director of research Tim Lawless said that while Perth, along with Adelaide, defied the major trend of declining quarterly growth among major capital cities, both regions remain below the peak quarterly rate of growth reached in May 2021. 

“Since then, housing has been getting more unaffordable, households have become increasingly sensitive to higher interest rates as debt levels increased, savings have reduced and lending conditions have tightened,” he said. 

“Now we are also seeing high inflation and a higher cost of debt flowing through to less housing demand,” he added. 

Compared to May 2021, the average price of a property in Perth is now up 5.6 per cent, with the median dwelling value in the city now at an all-time high of $552,128. 

Despite the $3,400 monthly increase in median dwelling prices, the city continues to be one of the most affordable places to buy a property. The city’s average price tag for a property is only higher than Darwin’s, where dwellings are sold with a median price tag of $504,306. 

Diving deeper into the data, both the house and unit sectors grew strongly over the month — albeit at a slower compared to April’s pace. 

Median values for houses in the city grew 0.8 per cent in May, slowing down from the 1.2 per cent gain seen in April.

This brought the city’s annual growth to 5.9 per cent, with the average price of a house in Perth now at $582,550 — representing an increase of almost $3,800 month on month. 

Meanwhile, the city’s unit market posted a 0.7 per cent monthly increase, speeding up from the meagre 0.3 per cent gain recorded in April. 

On an annual basis, the median price of a unit in Perth is up 3.6 per cent, with the average price tag of an apartment in the West Australian capital at $410,850. This indicates a growth of $1,100 in the sector’s median price. 

Separate data from REIWA showed Perth’s median house sale price stood at $525,000 during April, with the figures unchanged from the previous month. 

Mr Collins revealed that 64 Perth suburbs recorded price growth during the month, indicating strong market regions across the city. 

But he added: “Despite the fact [that] prices are rising, Perth continues to have the most affordable median house sale price of any capital city in the country.”

The suburbs to record the biggest increase in median house sale price during the period were North Perth (up 4.5 per cent to $1.1 million), Wembley Downs (up 2.7 per cent to $1.31 million), Langford (up 2.6 per cent to $380,000), Wilson (up 2.5 per cent to $610,000) and Bedford (up 2.3 per cent to $750,000).

Other suburbs to perform well in May were Meadow Springs, Yanchep, Brabham, Kardinya and Attadale.

Supply and demand

Despite Perth recording a rise in listings in May, Mr Collins said that the market is far from being in a state of balance as the city continues to grapple with a supply shortage. 

REIWA reported a total of 8,519 Perth properties had a “for sale” sign at the end of April, which is 6 per cent higher than April and 11 per cent lower than the end of May 2021.

“We saw a notable increase in listings for sale during May, which is pleasing, however, stock levels remain well below the 12,000 to 13,000 figure that we’d expect to see in a balanced market,” Mr Collins said.

Data from SQM Research supported this observation, which showed that total residential property listings in the West Australian capital fell by 2.5 per cent month on month from 22,373 in April to 21,809 in May. 

Compared to May 2021, the number of available stock in the city is down by 1.2 per cent. 

New listings (or properties that have been on the market less than 30 days) in Perth rose by 0.5 per cent from 7,438 in April to 7,473 in May. Compared to the same period last year, new listings in the city are also up by 4.9 per cent. 

Data showed that old listings or property listings over 180 days also rose by 3.4 per cent from 3,889 in April to 4,023 in May. On an annual basis, old housing stock in the city is down by 15.3 per cent. 

Looking at the bigger picture, CoreLogic data showed that Perth’s total advertised stock level was 34.7 per cent below the five-year average in May. 

Despite the low numbers of properties available, Mr Collins said sales volumes were up and consistently reaching around 1,000 properties a week.

“These are quite solid numbers,” he said. “In 2018 and 2019, it was regularly 600 properties a week, we are seeing not much stock available.” 

He added that the shortage in supply has also led Perth properties to sell like hotcakes over the month. “As soon as anything good comes to market, it sells very quickly,” he said.

The median time to sell a house was 13 days during May, which is the same amount of time as April and one day faster than May 2021.

“Properties continue to sell fast. Perth is firmly in a seller’s market and buyers need to ensure they act quickly and present their best offers first to avoid missing out,” Mr Collins said.

Data showed the fastest-selling suburbs in May were Cooloongup (six days), Bedford (seven days), Heathridge (seven days), Melville (seven days) and Waikiki (seven days).

Other suburbs to record fast median selling times were Woodvale, Kingsley, Piara Waters, Butler and Camillo.

In terms of sales, REIWA reported on 31 May that turnover volume was up 15 per cent on a monthly basis and 4.1 per cent higher over the year. 

Auction markets

Data from CoreLogic showed that over May, a total of 70 properties went under the hammer in Perth, with a final average clearance rate of 43 per cent. Last month, the number of properties sold under the hammer came in at 52.6 per cent. 

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.  

Vacancy rates 

Perth’s rental crisis worsened in May, as rental listings in the city remained scarce for prospective tenants over the month. 

According to REIWA, there were 2,322 properties for rent in the city at the end of May, which is 7 per cent less than at the end of April and 18 per cent less than at the end of May 2021.

“The rental shortage will not go away without a significant uplift in private investment. We need to ensure property investment is encouraged in Western Australia so that there are enough available rentals to keep up with tenant demand,” Mr Collins said. 

REIWA also revealed there were 12 Perth suburbs with just one rental up for grabs at the end of last month, prompting the state’s peak real estate body to call on investors to help inject the market with additional supply. 

“There is an urgent need for more investors in WA, with fewer than 2,500 properties available for rent in Perth and vacancy rates across the state remaining at or near record lows,” he stated. 

Separate data from Domain showed the city’s vacancy rate stood at 0.6 per cent in May. Despite the figures being unchanged from last month, the figures indicate that tenants are doing it tough in the city. 

In terms of supply, Perth’s vacant rental listings fell by 4.1 per cent month on month to just above 1,000.

The areas with the highest vacancy rates across Perth were Cottesloe – Claremont (1.3 per cent), Fremantle (1.3 per cent), Perth City (1.2 per cent), Mandurah (0.7 per cent), and Melville (0.6 per cent). 

Meanwhile the suburbs of Kwinana (0.1 per cent), Gosnells (0.3), Kalamunda (0.3 per cent), Armadale (0.3 per cent) and Cockburn (0.3 per cent). 

Rental market

In a further sign that Perth’s rental market is red hot, REIWA’s data showed Perth’s weekly rent price averaged $470 in May — indicating an increase of $10 over the month. This marks the second time average weekly rental prices rose during the year. 

While the current rental market conditions are challenging for tenants, Mr Collins stated that Perth “continues to have the most affordable rental environment in the country”. 

The suburbs to record the biggest increase in median rent during May were Como (up $40 to $545 per week), Butler (up $15 to $420 per week), Dianella (up $15 to $465 per week), Secret Harbour (up $15 to $475 per week) and Armadale (up $10 to $350 per week).

Other suburbs to record notable rent price hikes were Midland, Girrawheen, Waikiki, Thornlie and Belmont.

In terms of leasing time, it took a median of 16 days to lease a rental during May, which was the same as April and two days faster than May 2021.

The suburbs where “for rent” signs were quickly overturned were Seville Grove (10 days), Harrisdale (12 days), Butler (12 days), Success (12 days) and Alkimos (13 days).

Other suburbs to experience fast median leasing times were Success, Willetton, Harrisdale, Spearwood and Byford.

CoreLogic’s data showed that rents for houses and units in Perth rose by 6.6 per cent and 5.3 per cent over the year. 

Meanwhile, the gross rental yield in the city stood at 4.4 per cent in May, unchanged from the previous month. 

Outlook for Perth’s market 

With the RBA set to steadily raise the cash rate through the rest of the year and into 2023, most market experts predict a sharp decline in price growth across the country. 

But for Mr Collins, things are still looking up for Perth, as current market conditions are seen to set up the city for further growth. 

He enumerated that an expected surge in migration with the easing of borders, the city’s strong economic position, as well as Perth’s relative affordability compared to other markets, will continue to drive up prices in the coming months. 

“At some stage this year, we will start to see more migrants coming in for jobs,” Mr Collins said.

“Although it is going to be harder to get people here than it used to be, this population growth will continue to fuel demand.”

Mr Collins also cited that Western Australia is the cheapest state in the country for housing — around 25 to 30 per cent lower than Brisbane and Melbourne and 15 per cent lower than Adelaide. 

“Our national body does affordability studies, and the last report stated that in WA an average 26.2 per cent of income goes on a mortgage,” he said.

Domain’s latest First Home Buyer Report also showed that Perth is still the best choice for home buyers looking the enter the market, even amid rising interest rates. 

Domain chief of research and economics Dr Nicola Powell explained: “Perth is the best city for first-home buyers, with the quickest savings time at three years and seven months for an entry house, less than half of the time taken in Sydney.”

Mr Collins said that with the way the year is unfolding, REIWA is still betting on the city to deliver double-digit growth this year. “We are forecasting the 2022 calendar year to grow 10 per cent, and that is looking to be on track,” he said.

Meanwhile, Mr Lawless predicts Perth housing prices will grow a further 3 to 5 per cent this year, on the back of 3.6 per cent growth so far since January.

The expert believes that Perth will be more insulated from the sharp downturns observed in Sydney and Melbourne. 

“The fundamentals in Perth are very good, with its labour and jobs market, a strong economy, and the affordability of homes,” he said.

Data from the Australian Bureau of Statistics (ABS) showed that Western Australia’s unemployment rate is at an all-time low of 2.9 per cent, an economic trend that experts believe has underpinned demand in the city. 

“Demand is coming up against really low supply levels, and this will keep a floor under the price,” Mr Lawless stated. 

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