Property market update: Perth, July 2022

Real Estate Institute of Western Australia (REIWA) president Damian Collins said Perth’s property market was still holding up well despite headwinds. 

“Perth is one of the few capital cities in the country that has seen continued growth in home values since the Reserve Bank of Australia made the decision to increase the cash rate,” Mr Collins said.

He highlighted that the state’s strong economy, growing population and affordable housing put Perth in a “better position” to handle the increased costs of servicing a loan compared to its east-coast counterparts, namely Sydney and Melbourne. 

The local expert also noted that with the state facing a housing and labour shortage simultaneously, the upward pressure on home prices would only increase. 

“We have low stock levels and properties are not being built quick enough. For as long as this remains an issue, competition amongst buyers will remain high and prices will continue to rise,” he stated. 

While Mr Collins acknowledged that there would be variations in the rate of growth as the year progresses, he asserts that the overall low supply in the city, combined with Perth’s strong market fundamentals, will ensure that the city’s growth cycle will continue. 

“Not only do we have the most affordable housing in the country and a strong economy and jobs market, but we also have a housing shortage and growing population. While there may be some fluctuation month to month, all these factors point to Perth’s current growth cycle continuing,” he stated. 

But CoreLogic noted that while Perth is still recording growth, its current monthly gains represent sharp slowdown in the pace of capital gains since the first interest rate hike in May. If the current trend continues, the property data provider suggested that the city may not be entirely scot-free from the downturn. 

CoreLogic’s research director Tim Lawless forecast that housing market conditions are likely to worsen as interest rates surge higher through the remainder of the year.

“Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis (GFC) in 2008,” he stated.  

With that said, will Perth continue to be one of the last strongholds of the property boom? Or will the West Australian capital also succumb to property declines in the coming months? 

For now, let’s see how the city’s property market performed in July 2022. 

Property values

CoreLogic data showed that dwelling values rose 0.2 per cent in July, marking the seventh consecutive month the city saw property prices rise this year. 

Despite delivering another month of gains, the figures indicate an easing from the 0.4 per cent increase recorded in June. 

On a quarterly basis, property values in Perth are up by 1.2 per cent — indicating a slowdown from the 2.1 per cent rolling three-month period gain recorded in June. 

The average price of a property in Perth has risen by 5.4 per cent over the last 12-month period to July, with the median dwelling value in the city now at an all-time high of $560,020. 

During the month, both the house and unit sectors also recorded gains in median value — albeit at a slower pace compared to June. 

CoreLogic noted that units are outperforming houses as the sector’s relative affordability draws investors and first home buyers. 

Data showed median values for houses in Perth grew 0.2 per cent in July. The figures are down by half from the 0.4 per cent gain recorded in June and represent a continuous deceleration from the 0.8 per cent increase tallied in May and from the 1.2 per cent seen in April. 

This brought the sector’s annual growth to 5.8  per cent, with the average price of a house in Perth now at  $587,024 — representing a median price increase of more than $1,900 month on month.  

Meanwhile, the average price of a unit in the city rose by 0.3 per cent in July, up from the 0.2 per cent the sector notched in June. 

On an annual basis, the median price of a unit in Perth is up 2.6 per cent, with the average price tag of an apartment in the West Australian capital at $411,460.  

Separate data from REIWA showed that 65 suburbs across the city recorded median house sale price growth during July. 

According to Mr Collins, the strong price growth showed Perth market was still tracking along well. 

“The Perth market typically slows in winter, so it’s pleasing that when we drill down to suburb level, a large number are still seeing growth — especially considering the three recent interest rate rises,” Mr Collins said.

Data from the state’s peak real estate body showed that the five suburbs to record the biggest increase in price during July were Brabham (up 10.1 per cent to $333,750), Alkimos (up 4.6 per cent to $371,250), Lakelands (up 4.1 per cent to $385,000), Banksia Grove (up to 3.7 per cent to $420,000) and North Perth (up 3 per cent to $865,500).

Other suburbs to perform well during the month were Gosnells, Hammond Park, Southern River, Kelmscott and Langford.

A separate report from REIWA also revealed that the city had a record-breaking financial year, with 11 suburbs entering the $1 million price category for the first time in their history.

Supply and demand 

While overall supply levels in Perth’s market continued to be low in July, it’s widely expected that the upcoming spring selling season could push up listing numbers significantly. 

SQM Research’s data showed that total residential listings in the city rose by 5.5 per cent in July to 22,516 from 21,341 in June. Compared to the same year, the overall supply is up by just 1.7 per cent. 

Separate data from CoreLogic showed that Perth’s advertised stock levels are 30 per cent below the five-year average — indicating that the city’s market continues to enjoy strong absorption rates and that the market is still undersupplied. 

REIWA’s data showed that there were 8,592 properties with a “for sale” sign across Perth at the end of July, edging up marginally from the 8,541 recorded the previous month. 

“Listings volumes across Perth are very low and remain a key driver for why we expect Perth’s current growth cycle to continue,” Mr Collins said.

In terms of demand, REIWA data showed that the median time to sell a house was 17 days during July, which is one day slower than June and two days faster than July 2021.

“We’ve seen a slight increase in the number of days it takes to sell a home over the last couple of months. This figure for July is still significantly faster than the 30 to 40 days we would see in a balanced market,” Mr Collins said.

The fastest-selling suburbs during the month were East Cannington (four days), Parmelia (five days), Orelia (five days), Erskine (six days) and Padbury (six days).

Other suburbs to record fast median selling times were Stratton, Scarborough, Greenfields, Merriwa and Cooloongup.

But Mr Lawless stated that as listings ramp up in line with the common market trend observed in the lead-up to spring, downward pressure on demand will increase, which, in turn, could drive auction clearance rates lower and extend selling times. 

“By late spring or early summer, we could be seeing advertised stock levels trend higher than normal,” Mr Lawless said.  

The expert further explained that while a more substantial flow of advertised stock against a backdrop of falling demand is “great news” for  buyers — as it will increase options and lower the urgency to close a deal — sellers are left with less desirable conditions.

“[It’s] bad news for vendors, who could find selling conditions become more challenging as advertised stock levels rise,” he added. 

As interest rates continue to rise, CoreLogic also anticipates sales volumes to slow as 2023 approaches, with buyers acting with more caution.

Vacancy rates 

Perth’s rental market continued to tighten as the city’s vacancy rate fell to a new record low in July.

Domain’s latest data showed that the West Australian capital’s vacancy rate slid to a new all-time low of 0.5 per cent during the month. From April to June, the city’s vacancy rate was unchanged at 0.6 per cent. 

At the end of July, the number of available rental listings in Perth stood at 879, representing a 7.2 per cent decline from June and a further 28.2 per cent decline from July 2021.  

The areas with the highest vacancy rates across Perth were Cottesloe – Claremont (1.5 per cent), Fremantle (0.9 per cent), Perth City (0.8 per cent), Melville (0.6 per cent), and Belmont – Victoria Park (0.5 per cent). 

On the other end of the spectrum, Kalamunda offered no vacancies to tenants, with a zero vacancy rate, while Gosnells, Armadale, Serpentine – Jarrahdale and Cockburn all recorded a 0.2 per cent vacancy rate at the end of the month. 

Separate data from SQM showed that Perth had a vacancy rate of 0.6 per cent in July, unchanged from the previous month. The city’s number of available rental listings stood at 1,335 at the end of the month, down from the 1,905 recorded in July 2021. 

REIWA’s data showed that there were 2,277 vacant rental properties in the city at the end of July, almost unchanged from June’s volume. However, the monthly figures are 14.7 per cent lower than in July 2021.

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

The suburbs that recorded the fastest median leasing times were Dudley Park (eight days), Seville Grove (nine days), Piara Waters (11 days), Ellenbrook (11 days) and High Wycombe (11 days).

Other suburbs to record fast leasing times were Merriwa, Thornlie, Meadow Springs, Quinns Rock and Rivervale.

With the rental shortage continuing to be a “critical issue for the WA rental market”, Mr Collins reiterated REIWA’s statement that no major changes should be made to the state’s tenancy laws. 

At the end of July, REIWA rang the alarm following the publication of the results of a recent study that revealed that 61 per cent of the investors would exit the state’s rental market if major changes to Western Australia’s residential tenancy laws were adopted. 

Mr Collins warned that the figures are “deeply alarming” and added that if the federal government adopts the proposed changes, the state’s rental shortage will devolve into a rental crisis. 

Rental prices 

CoreLogic data showed that house rents in Perth rose by 7.7 per cent over the last 12 months to July, while unit rents also rose by 6.4 per cent during the same period. 

With rents rising faster than values, yields are consistently improving. Data showed that the city’s gross yields stood at 4.4 per cent in July. 

“Such tight rental markets, improving yields and stronger buying conditions should help to keep a floor under investment demand,” Mr Lawless said.

SQM’s data showed that house rents rose by 0.5 per cent over July, while unit rents increased by 0.8 per cent over the same period.

On an annual basis, house and unit rents are up by 20.3 per cent and 14.8 per cent, respectively. This brought the average weekly rent for houses to $599.52, while the median weekly price for units stood at $443.30. 

REIWA’s data showed Perth’s median rent price was $475 per week during July, which is $5 more than in June.

“Rent prices experienced a slight increase in July following a stable month in June. We expect rents will continue to grow throughout the second half of the year due to strong competition amongst tenants to secure a rental,” Mr Collins said.

Outlook

While the outlook for Perth is considerably brighter than that of its east-coast counterparts, the majority of economists from the big four banks believe that the city is also headed for the red zone by next year.

ANZ sees Perth prices rising 1 per cent in 2022 before slipping in 2023, as the lender predicts that “a steep increase in mortgage rates between May and the end of this year will weigh heavily on house prices”. 

On the upside, the lender sees Perth staging a 4 per cent rebound in prices in 2024. 

Westpac’s forecast for the West Australian capital is in the same vein, with the lender expecting the city to enjoy a 2 per cent increase in 2022 before suffering a 4 per cent decline in 2023.

This net loss of 2 per cent would see the median house price fall by $11,503 from $541,510 to $553,013, with Westpac noting Western Australia’s mining-rich capital was still better value.

“Stalled but less stretched affordability, tight supply, buoyant mining sector supportive,” Westpac stated. 

The Commonwealth Bank of Australia sees the city’s dwelling values over 2022 by 2 per cent before sliding 8 per cent next year. 

Out of the big four, the National Australia Bank has the bleakest outlook, with the lender predicting a 2.5 per cent gain in Perth’s dwelling values in 2022 before a steep 13.9 per cent tumble in prices in 2023. 

Despite the generally negative estimates by economists, local experts assert that Perth’s house values will continue to increase in the face of falling prices in other capital markets, persistent building supply issues, as well as international economic and geopolitical headwinds.

The state’s strong population growth, solid economic fundamentals and limited supply, as well as ongoing affordability, were pointed out to be Perth’s advantages over other capital markets. 

Echoing Mr Collin’s statement, REIWA chief executive Cath Hart said Western Australia was experiencing a housing and labour shortage at the same time — which she asserts will drive growth in the market. 

“For the whole industry, the whole housing continuum, we have low stock levels in the established market, both for sale and for rent, and build times for the new homes market are significantly extended. 

“For as long as they remain an issue, we expect competition among buyers will remain high and prices will likely continue to grow,” she stated during the UDIA WA Industry Lunch, Perth Property Prophecy. 

She added that interest rates were also more of an issue for more highly priced capital city markets, noting that Melbourne and Sydney property prices corrected as soon as interest rates began their upwards move in May, while Perth prices continue to make headway.

“I have a very optimistic view about the resilience of the WA market and the resilience of WA mortgage holders, in that the rate rises this year have seen an increase of $370 per month on the average mortgage in Perth compared to a $640 increase on the average mortgage in Sydney,” Ms Hart said. 

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