Property market update: Perth, June 2022

The city’s steadfast performance halfway into 2022 defies the continuous downturn observed in other capital markets, with Melbourne and Sydney particularly lurching lower as rising rates and increasing cost of living take a bite out of the two biggest cities’ property values.

Real Estate Institute of Western Australia (REIWA) president Damian Collins said the figures are a testament to the strong market conditions in Perth recorded “across all price points over the last 12 months”. 

He also highlighted that after experiencing solid price growth in the first six months of the year, Perth was well on its way to achieving the institute’s growth forecast of 10 per cent. 

He acknowledged that the traditional lull in the market during the winter months would likely cool the market, but not at a rate that will derail the city’s growth. 

“As we move through the winter months, it is likely some heat will come out of the market, however, not enough to impact Perth’s overall growth trajectory,” Mr Collins said. 

Despite the local expert’s positive outlook, CoreLogic’s head of research Tim Lawless claimed that “every capital city and broad rest of state region is now well past their peak rate of growth”, and Perth was no exception. 

Mr Lawless noted that while the growth in Perth’s housing values temporarily got a second wind as state borders reopened in March, the city is again losing steam month-on-month. 

“Housing value growth has been easing since moving through a peak in March last year, when early drivers of the slowdown included rising fixed term mortgage rates, an expiry of fiscal support, a trend towards lower consumer sentiment, affordability challenges and tighter credit conditions,” he explained.

The expert highlighted that the downward trend seen across the country gained momentum after surging inflation triggered the Reserve Bank of Australia (RBA) to step in and kick off its monetary policy tightening. 

“Since the initial cash rate hike on May 5, most housing markets around the country have seen a sharper reduction in the rate of growth,” Mr Lawless stated. 

To keep inflation within its target band of 2 to 3 per cent, the central bank has raised the official cash rate from a record low of 0.1 per cent to 1.35 per cent in a series of rate hikes from May to July.

“Considering inflation is likely to remain stubbornly high for some time, and interest rates are expected to rise substantially in response, it’s likely the rate of decline in housing values will continue to gather steam and become more widespread,” Mr Lawless stated. 

Will Perth continue to deliver growth amid a rising rate environment? Or will it also succumb to the shift in the market and find itself in the red in the coming months? 

For now, let’s see how the West Australian capital performed in June 2022. 

Property values 

CoreLogic data showed that dwelling values rose 0.4 per cent in June, marking the sixth consecutive month the city saw property prices rise this year. 

Despite delivering another month of gains, the figures indicate an easing from the 0.6 per cent increase recorded in May.

On a quarterly basis, property values in the city are up by 2.1 per cent — a slowdown from the 2.7 per cent rolling three-month period gain recorded in May. 

Compared to June 2021, the average price of a property in Perth is now up 5.8 per cent, with the median dwelling value in the city now at an all-time high of $558,644. 

Both the house and unit sectors grew over the month — albeit at a slower pace compared to the previous month. 

Data showed median values for houses in Perth grew 0.4 per cent in May. The figures indicate a continuous deceleration from the 0.8 per cent increase seen in May and from the 1.2 per cent seen in April. 

This brought the sector’s annual growth to 6.2 per cent, with the average price of a house in Perth now at $585,114 — representing an increase of more than $2,500 month-on-month. 

Meanwhile, the average price of a unit in the city rose by 0.2 per cent in June, cooling down from the 0.7 per cent growth seen in May. 

On an annual basis, the median price of a unit in Perth is up 2.8 per cent, with the average price tag of an apartment in the West Australian capital at $412,149. This indicates a growth of almost $1,300 in the sector’s median price on a monthly basis.

Separate data from REIWA showed that the suburbs to record the biggest increase in median house sale price during the month are Edgewater (up 3.3 per cent to $620,000), Riverton (up 3.3 per cent to $736,500), Kalamunda (up 2.8 per cent to $735,000), Jindalee (up 2.4 per cent to $640,000) and Padbury (up 2.3 per cent to $655,000).

Other suburbs with significant increases in the median house sale price were Alkimos, Mullaloo, Seville Grove, Shenton Park and Dawesville.

Weighing in on the monthly data, Mr Collins reiterated that Perth has “the most affordable median of any capital city in the country”. 

“While increases to the cash rate will have some impact on affordability, West Australians are very well positioned to manage these costs,” he added. 

If you’re looking to invest in the Perth property market, there are 10 suburbs you might want to take a look at first. Here are Perth’s 10 best-performing suburbs for FY22. 

Supply and demand

Perth’s residential property market went against its usual winter hibernation trend, as total listings in the city rose over the month. 

Data from REIWA showed that there were 8,541 properties for sale in the city at the end of June, which is 2.6 per cent higher than in May.

However, Mr Collins noted that supply in the market continued to outpace demand.  

“Listings for sale remain low. Until listing volumes reach that 12,000 - 13,000 balanced market figure, competition amongst buyers will be high — especially as the state’s population increases,” the local expert stated.

Data from CoreLogic showed that Perth’s advertised stock levels are 16.2 per cent lower compared to the same period last year by 16.2 per cent. 

Separate data from SQM Research showed that total residential listings in Perth fell 2.1 per cent over the month from 21,809 in May to 21,341 in June. Over the year, listings are down by 0.9 per cent. 

In terms of demand, REIWA data showed that the median time to sell a house was 16 days during June, which is two days slower than May and three days faster compared to June 2021. 

Commenting on the figures, Mr Collins stated: “While the median selling time was a couple of days slower than May, the June figure is still much lower than the 30 to 40 days we would typically see in a balanced market.” 

Data further showed that the fastest-selling suburbs in June were Orelia (three days), Parmelia (four days), Meadow Springs (six days), Kingsley (six days) and Medina (six days).

Other suburbs to record fast median selling times were Merriwa, Waikiki, Wanneroo, Safety Bay and Kinross.

For more insight on the market supply levels across the country, read our recent article: June new listing activity bucks downward trends. 

Auction markets 

Data from CoreLogic showed that over June, a total of 65 properties went under the hammer in Perth, with a final average clearance rate of 38.6 per cent. 

Last month, the city recorded a 43 per cent clearance rate out of 70 auctions that occurred throughout May. 

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 squeeze did not abate in June, as Domain’s data showed the city’s vacancy rate remained at a record low of 0.6 per cent during the month. 

Despite the drastically low number of available rental listings in the city, Domain noted that the rate has held steady for the last three months. 

At the end of June, the number of vacant rental listings in Perth stood at 947, representing a steep 12.8 per cent drop from May and a further 32.2 per cent decline from June 2021.  

The areas with the highest vacancy rates across Perth were Cottesloe – Claremont (1.6 per cent), Perth City (1 per cent), Fremantle (0.9 per cent), Melville (0.8 per cent), Mandurah (0.6 per cent). 

Meanwhile, data showed that Kalamunda (0.2 per cent), Gosnells (0.2 per cent), Cockburn (0.3 per cent), Armadale (0.3 per cent), and Kwinana (0.3 per cent) recorded the lowest vacancy rates in the city. 

Figures from REIWA showed that there were 2,296 properties for rent in Perth at the end of June, which is 0.5 per cent compared to May and 17.5 per cent less than at the end of June 2021.

Data from the institute also revealed that it took a median of 16 days to lease a rental during June, which was the same as May and four days faster than June 2021.

The suburbs that recorded the fastest median leasing times were Yanchep (eight days), Atwell (nine days), Yokine (10 days), Perth (11 days) and Queens Park (11 days).

Other suburbs to experience fast median leasing times were Alkimos, Balga, Duncraig, Seville Grove and Tapping.

Mr Collins acknowledged that supply shortage continues to be Perth’s biggest challenge.

“The housing shortage is the biggest issue facing the WA rental market. Whilst we have one of the most affordable rental environments in the country, there simply is not enough available rentals to meet tenant demand,” he stated. 

On this note, Mr Collins reiterated his call for investors to look into Perth as their next place of investment, adding that “it is imperative that no major changes are made to residential tenancy laws during the Residential Tenancies Act review which would discourage investors from buying properties in WA”.

To read more on the latest trends in the rental markets, check out our recent article: How Australia’s rental market fared at end FY22.

Rental markets 

Rents in Perth have increased by 2.6 per cent over the quarter to June and an impressive 6.7 per cent over the past 12 months, according to the latest report by  CoreLogic.

This brought the average weekly rent for all dwellings in the city to stand at $515 at the end of the financial year. 

Across all dwellings, gross rental yields in Perth stood at 4.38 at the end of June. 

Compared to June 2021, house rents in the West Australian capital have risen by 6.9 per cent, while unit rents have increased by 5.5 per cent. This brought the average weekly house and unit rents in Perth to stand at $523 and $451, respectively. 

CoreLogic noted that despite growing affordability concerns, rental demand is expected to remain high for some time yet, partly due to the low levels of investment in the medium and high-density sector seen between 2017 and 2021. 

Meanwhile, separate data from REIWA showed that Perth’s median rent price held at $470 per week during June.

“While the median rent price has risen over the last year, we are not seeing month-on-month unsustainable growth rates,” Mr Collins said.

Outlook for Perth’s market

While the recent rate hikes’ impact is now beginning to become more evident in bigger cities such as Melbourne and Sydney, the RBA’s monetary policy tightening is yet to have an effect on Perth, according to Mr Collins. 

He explained that because the city grew at a more moderate pace compared to other cities during the boom, it still has “got a bit of growth to go”.

“We’ve certainly been probably the slowest growing major capital city in the last two years out of all of Sydney, Melbourne, Brisbane, Perth, Adelaide and Hobart,” Mr Collins stated. 

Additionally, he underlined that low unemployment, coupled with an uptick in population when borders reopened in March, helped in underpinning the city’s stable growth. 

“Lots of migrants are starting to return into Western Australia and we’ve got quite a significant shortage of housing at the moment and rental vacancy rates are near 40-year lows,” he said.

For comparison, Mr Collins said the Sydney and Melbourne housing markets “went up too much, too quickly”, making them “too unaffordable” and more vulnerable to rate hikes. 

“That has meant that with interest rate rises, those markets are very sensitive, because they’re carrying a lot of debt. That combination of those things has meant prices there have started to fall and I think those markets will be the most sensitive to interest rate rises over the next 12 months,” he said.

On that note, he posited: “The more affordable locations like Perth and Adelaide will be less sensitive to interest rate rises.”

Meanwhile, Mr Lawless said the market was in the “fairly early stages” of a decline, with the extent of falls depending partly on how rapidly the Reserve Bank lifts its interest rate to combat inflation.

“There’s still probably another potentially 12 months ahead of us in this downturn,” he said.

“Australia’s housing market outlook is becoming increasingly skewed to the downside, with the trajectory of housing values heavily dependent on the path interest rates take,” he added.

Some economists also updated forecasts after the RBA revised its inflation forecasts up from its estimate of 5.1 per cent in the March quarter to 7 per cent. 

Generally, economists from the four biggest banks are singing the same gloomy tune, with most analysts forecasting property prices in the country will fall by between 15 and 20 per cent (depending on who you ask) over the 12 months.

But Mr Lawless explained that a fall as deep as 20 per cent would not be as detrimental to the housing market as most market analysts paint it to be. 

He said that a 10 per cent decline in the market (a figure which is becoming more widely accepted across the various private sector forecasts) would take national housing values back to levels seen in July 2021.

Meanwhile, a 15 per cent decline would take the market back to April 2021 levels.

As for a scenario of a 20 per cent decline turning into reality, he highlighted that the national index would still be at January 2021 levels and only marginally above where home values were in late 2017, he explained. 

Another factor that will keep the floor under the housing market is that many borrowers have buffers against rising mortgage interest rates, as they have been making repayments above required minimums.

“[This means] most households have a significant safety net if temporarily faced with a change in circumstances,” Mr Lawless stated.  

For a deeper insight into the current state of the market, check out our recent podcasts: Tick-tock, what’s the time on the property clock? and The rationale behind a 50-basis point rate hike. 

For more industry expert insights on the property market, check out our other amazing podcast series. Also, make sure to check our News section for the latest property market reports, insights, news and useful tips and strategies for investors.