Property market update: Perth, July 2021

CoreLogic’s head of research Australia, Eliza Owen said that the national first home buyer incentives ending, along with the surge in property prices and higher demand in that price bracket across WA, has led to the city recording a subdued growth rate in July. 

“The upswing in Western Australia has been very reliant on first home buyers so it could be that affordability constraints are leading to these more subdued growth rates,” she said. 

But on an optimistic note, experts pointed out that despite growth tapering, Perth’s property prices were still tracking upwards, albeit at a slower pace. 

“It’s a relatively low growth rate when compared to the other capital cities but it does still signal a steady uplift across Perth,” Ms Owen said.

Real Estate Institute of Western Australia’s (REIWA) president Damian Collins said that while the pace of growth had weakened, the city’s property market is still positioned for further growth. 

“Even though the rate of growth has slowed down, it is reassuring to see there has still been price growth, which will put Perth in a strong position as we enter the spring selling season,” he said.

Let’s see how Perth’s property market performed in July 2021 and what to expect from the WA capital outlook in the coming months. 

Property values 

According to CoreLogic’s data, dwelling values in Perth rose 0.3 per cent in July, a 0.1 percentage point increase from the previous month. However, the monthly increase is still the weakest among its capital city peers, which have all recorded an increase above 1 per cent during the period. 

Over the last 12 months, dwelling values in the WA capital have risen by 10.8 per cent. The median dwelling value for July was about $532,392, which means average prices of houses in the city have increased by $6,226 over the month. 

House prices rose by 0.3 per cent month-on-month, with the median price almost unchanged at  $556,509. Despite the weak monthly increase, the house sector’s annual growth rate remained in the double digit territory, recording an 11 per cent growth compared to the same period last year. 

During the same period, the unit market notched a 0.6  per cent increase, bringing the median value to  $404,257. Unit prices have increased by 9.6 per cent from July 2020. 

Meanwhile, REIWA figures showed Perth’s market recovery was widespread across all price points, with the top-performing growth suburbs also the more affordable suburbs.

The institute’s data showed that suburbs to record the biggest increase in median house sale price in July were Spearwood (up 3.3 per cent to $485,000), Kingsley (up 3.1 per cent to $620,000), Leda (up 2.9 per cent to $300,500), Success (up 2.8 per cent to $521,000) and Greenfields (up 2.8 per cent to $297,500).

Looking at the bigger picture, REIWA also said house prices in Perth are growing faster than they did during the previous market growth cycle. Data showed that the current recovery in the city’s housing market has put the average growth rate at 0.9 per cent, almost double the 0.5 per cent increase recorded during the growth cycle that lasted from 2011 to 2014. 

During the prior growth cycle that lasted 30 months, house prices in Perth rose by 15 per cent. At its current trajectory, the current growth cycle appears to be on track to overshadow this growth. 

Mr Collins said 12 months into the current growth cycle, prices have already gone up by 11 per cent, with the majority of the growth occurring in the first six months of 2021. For comparison, the total price growth recorded during the first 12 months of the previous cycle was just 6 per cent. 

Supply and demand  

Despite the observed in Perth's house-price growth, other market indicators, such as demand and supply, remained robust.

It seems Perth’s wettest July in many years hasn’t dampened buyer appetite, with listings soaked up by buyers, data from different firms showed. 

The number of available properties continued to be outstripped by the high demand in the WA capital, driving prices higher. Figures released by SQM showed total listings rose by 2.8 per cent from 21, 539 in June to 22,142 in July. However, property listings are trending downwards over the year, falling by 23.9 per cent from 22, 525 in July 2020. 

In a sign that demand continues to be strong, older stock or property listings over 180 days dropped 6.5  per cent over the month and 50.5 per cent over the year. 

To corroborate the trend of strong demand outpacing supply, REIWA data showed a decline in overall residential property listings over the month, driven by houses.

Data from reiwa.com revealed listings for sale fell 2.3 per cent in July and are down 6.4 per cent compared to April 2021, with Banksia Grove, Lockridge, Darlington, Glendalough, and Helena Valley reporting significant declines in listings. 

Properties are also selling out fast, with the median time to sell a property in July at 17 days. While this is one day slower than in June, the median selling time for the period was still 27 days faster compared to the same period a year ago. 

Data showed that Kingsley was the fastest-selling suburb, with houses only taking an average of six days to sell. Selling period also fell to seven days in Willetton, eight days in Heathridge, Kinross, and Palmyra, nine days in Waikiki, and 10 days in Greenwood, Leeming, Hocking, and North Perth.

Mr Collins said it is pleasing that stock is being snatched up quickly, despite the very wet weather Perth has been experiencing.

“Normally wet weather dampens people’s interest in attending property inspections, but July was still a very strong month for sales. As we transition out of winter into spring, this should put the Perth property market in a good position to continue its strong recovery,” Mr Collins said. 

Auction market 

Perth’s auction market had mixed results throughout July, as localised lockdowns affected market activity across the country. 

Perth entered lockdown at the end of June throughout the first week of July as part of the WA government's steps to stamp out the spread of COVID-19's Delta variant. 

In the week ending 4 July 2021, only 15 Perth homes went under the hammer with a clearance rate of just 33 per cent.

But the city’s clearance rates ended the month on a higher note, recording a 55 per cent clearance rate on 25 auction results in the week ending 25 July 2021. 

As the country continues to grapple with the recent outbreak, auction markets across capital cities face uncertainty on how potential lockdowns and restrictions will affect activity. 

But Corelogic’s CoreLogic’s Eliza Owen argues that auctions have generally improved with each lockdown. 

“Many real estate agents are now running both physical and online auction formats in parallel, making it easier for prospective buyers to participate in the auction event should restrictions be implemented. Buyers may also have become more adept with these formats.

“With agents finding ways to navigate the auction market amid social distancing restrictions, the clearance rate is more likely to reflect market sentiment than be directly impacted by a shorter-term lockdown,” she said.

Rental market 

One of the biggest challenges faced by Perth’s tenants is the increasing affordability constraints of the rental market.

Over the past year, rental values rose 16.4 per cent, the second highest uplift of the capital cities behind Darwin, REIWA data showed. Perth’s median rent price was unchanged in July, holding at $425 per week.

CoreLogic’s report also showed that Perth was one of the frontrunners among capital cities in terms of gross rental yields with 4.3 per cent, only trailing behind Darwin that leads the pack with 6.0 per cent. 

But Mr Collins noted that while the median rent price in the city has risen over the past year, it was still cheaper by $25 compared to the record median rent price in 2013 and 2014, which was $450 per week. He attributed the decline in the rate of growth to the end of the rental moratorium in the state. 

And while there is still a rental shortage in the WA capital, listings for rent have risen by 13 per cent since the peak of the rental shortage seen in December 2020. There were 2,734 properties for rent in Perth at the end of July, according to reiwa.com data.

Mr Collins said that this ‘encouraging trend’ needs to continue in order to have a balanced market. 

In July, the five suburbs to record the biggest increase in rental listings were Bayswater, Mount Hawthorn, Halls Head, Ascot and Bassendean.

Vacancy rates 

Perth vacancy rates hit a multi-year low in July, which could give landlords in the city a strong case to hike asking rents, according to Domain. 

The city’s rental market further tightened during the month, edging down from 0.8 per cent in June to 0.7 per cent in July. The recent figures are also a few percentage points lower than the 1.3 per cent in July 2020. 

The areas with the highest vacancy rate were Perth City (1.7 per cent), Cottesloe – Claremont (1.5 per cent), South Perth (1.1 per cent), Canning (1 per cent), and Fremantle (0.9 per cent).

Meanwhile, the areas with the lowest vacancy rate were  Kwinana (0.2 per cent), Gosnells (0.2 per cent), Wanneroo (0.3 per cent), Swan (0.3 per cent) and Kalamunda (0.4 per cent). 

Outlook

So, what lies ahead for Perth’s property market? 

Mr Collins believes that there are still plenty of opportunities for further price gains in Perth's housing market, as the low listing stock and the still increasing demand from buyers are seen to continue to drive growth.

“Once we move into the spring selling season and the warmer weather descends, we expect that the Perth market recovery will start to accelerate again,” he said. 

This optimistic outlook for the market is at odds with the forecasts of some experts who see the property boom tapering off for the next few months. 

CoreLogic research director Tim Lawless said there were now signs the national market was losing steam as the monthly growth rate had dropped below the March peak of 2.8 per cent. He pointed to the growing housing affordability challenges along with less fiscal support as the main factors that have slowed down the pace of growth in the last few months. 

The property analyst also flagged other potential headwinds including the possibility of tighter credit policies and an earlier than expected lift in interest rates by the Reserve Bank of Australia. 

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