Property market update: Perth, August 2021

What is traditionally a quieter time for the property market turned out to be a scorching season for Perth, as the city saw a winter housing boom in August. 

Perth property upswing continues to be strong, with local market observers reporting competitive market conditions during the winter months. 

This is a stark contrast to the bigger capital cities’ real estate markets (such as Sydney and Melbourne), where slowing growth has been reported. 

The continued decline in listings, skills shortage, and strong interstate migration is setting up Perth for a strong spring season and the city is expected to see continued growth in the coming months, according to property investment consultancy, Momentum Wealth.

“A drop in the total number of listings for sale, widespread skills shortages and interstate migration are all favouring market growth, with no sign that the current growth phase has run its course,” Jennifer Wakeman, the general manager of Momentum Wealth stated.

For now, let’s take a closer look at how Perth’s property market performed in August 2021. 

Property values 

More than 200 suburbs reported significant price growth in August, with some even recording double-digit gains, according to REIWA’s most recent monthly figures. 

Data from REIWA showed that between 31 May and 31 August 2021, median house sale prices increased in a total of 233 suburbs across the city. 

Leading the charge was Brookdale, with a staggering 16 per cent price surge. This was followed by western suburbs Churchlands and Shenton Park with 12 per cent.

Other suburbs to make the top 10 list were Shenton Park, Swanbourne, St James, Wembley Downs, Wannanup, Orelia, Woodlands, and Hamilton Hill.

Compared to the same period in 2020, there were 104 more Perth suburbs that recorded price growth this year.

Overall, Perth’s current growth cycle, which began in August last year, is now on its way to exceeding the total growth recorded from 2011 to 2014 – the last period of sustained price increases in the city. 

During that period, the city’s real estate market had a median average growth rate of 0.5 per cent and saw home values increase 15 per cent in 30 months.

Comparatively, the current growth cycle is tracking at a monthly growth rate of 0.9 per cent and has recorded almost 11 per cent growth in just 12 months.

REIWA president Damian Collins described the property price growth between June and August as “impressive” in the wake of the wet winter month. 

He added, “the Perth property market has changed quite dramatically since winter 2020 … and it remains firmly in a recovery phase, with many suburbs feeling the benefits of this current growth cycle”.

Despite the strong price growth observed in the last 12 month period, Western Australia remains very affordable compared to its capital city peers. In fact, an analysis by reiwa.com found that there are 112 suburbs in Perth where it is cheaper to own a home with a mortgage and other costs than it is to pay rent. 

This means there is still plenty of opportunities for prospective buyers to exit the rental market and step onto the WA property ladder. 

According to REIWA, the top three Perth suburbs to offer buyers the best value when comparing the monthly costs of buying to renting are Brentwood, Medina, and Parmelia. 

Other suburbs in the top 10 are Bullsbrook, Orelia, Armadale, Camillo, Leda, Lockridge, and Brookdale.

Of these 10 suburbs, nine have a median house sale price below the Perth median of $520,000, with eight of those below $300,000, which is the average threshold for first-time homebuyers.

Note: CoreLogic withheld its index results for Perth and regional Western Australia in August “pending the resolution of a divergence from other housing market measurements in WA”.

Supply and demand 

The tightening supply of properties across Perth is putting pressure on the market, as demand continues to outweigh stocks and as labour constraints affect deliveries. 

Data from the REIWA revealed that there were 8,511 total listings for sale in Perth in August, indicating a 21.95 per cent decline compared to the same period in 2020, and a 40.69 per cent drop compared to August 2019. 

SQM’s latest data painted a similar picture. Perth’s property listings fell in August 2021 by 6.5 per cent to 20,706 from 22,142 in July 2021. Over the year, listings in the city have fallen by 28.2 per cent. 

In a sign of strong demand, old stocks across the city also fell during the month. The number of properties that have been on the market for more than 180 days fell by 10.9 per cent over the month and 59.4 per cent over the year in August, indicating strong absorption rates across the city. 

Meanwhile, new listings fell 9.5 per cent over August 2021 to 6,548 properties on the market. 

Asking prices fell 0.8 per cent for units and 2.5 per cent over the month. However, over the year, both units and houses rose 4.5 per cent and 4.1 per cent respectively. 

“We are likely to see a continued tightening of supply in Perth’s residential market for some time yet,” Ms Wakeman stated.

One contributing factor to the tight market conditions is the slow delivery of the new homes guaranteed by the surge in Perth’s housing approvals in the last 12 months. 

The lag from approval to construction, coupled with delivery being slowed down by labour constraints, as well as supply-chain constraints linked to high building demand, the needs of the mining industry and overseas building booms drawing on materials have all contributed to the current conditions. 

The need to fill Western Australia’s high number of job vacancies is also putting pressure on the declining housing stocks.

According to the Internet Vacancy Index by Bankwest Curtin Economics Centre, Western Australia has the highest rate of advertised vacancies in Australia, with over 45,000 advertised job vacancies in the region as of May 2021. 

The surge in the number of projects in the region’s mining/resources and construction industries has resulted in reports of widespread skills shortages in key roles, particularly machinery operators, technicians and trade workers.

“Limits on cross-border movement mean it’s currently challenging to recruit interstate, but as borders open up there will be more interstate migration from skilled tradespeople and professional workers to fill roles,” Ms Wakeman said.

This, in turn, Ms Wakeman stated, will boost demand for housing and consequently tighten tock further and drive up prices.

On the demand side, Perth homebuyers did not show any signs of stepping back from the market. Despite the winter months hauling in fewer overall sales, there were still several of Perth suburbs that recorded increases in activity as the cold season failed to dull the appetite of Perth’s house hunters. 

REIWA data showed that Cooloongup was again the top performer for August, seeing a 44 percent surge in sales activity compared to July. 

Completing the top 10 suburbs for sales activity growth during the month are Wandi, Merriwa, South Lake, Medina, Bedford, Balga, Morley, Duncraig, and Camillo.

Competition among buyers remained fierce in August, with reiwa.com data showing it took an average of 18 days to sell a home – 16 days faster than August 2020.

The fastest-selling Perth suburbs were Heathridge, Kinross, and Willetton – all of which took a median of just seven days to sell a property last month. 

This was followed by Bedford and Coolbellup with a median of nine days, Padbury and North Perth with a median of 10 days, Scarborough and Tapping with a median of 11 days, and Carramar with a median of 12 days.

Rental market

Perth’s rental market saw further tightening in August, as low rental vacancies drive prospective tenants to seek out coastal suburbs. 

REA Group's PropTrack Rental Listing Report indicated rental listings in Western Australia hit historically lows through August.

Data showed Perth reached its lowest volume since February 2021, falling 2.2 per cent month-on-month. Perth’s supply of rental stock continued to tighten with a 4.3 per cent monthly decline in total rental listings. On a regional level, listings were historically low following a 8.8 per cent monthly decline.

Areas with the biggest increase in new listings were Bicton (100 per cent), Atwell (91 per cent), Bayswater (89 per cent), Leederville (85 per cent), and Halls Head (60 per cent).

On one hand, areas with the biggest declines were High Wycombe (52 per cent), Tuart Hill (48 per cent), Kelmscott (46 per cent), Queens Park (45 per cent) and Canning Vale (43 per cent). 

Mandurah had the lowest supply of rental stock (4.1 per cent) while the south-east had the most rental properties available in the city (24.9 per cent).

Meanwhile, CoreLogic named Perth as one of the strongest rental markets in the country, with the annual change in house and unit rents at 15.8 per cent and 14.8 per cent respectively. However, it noted that the annual rate of rental growth in the city appears to have peaked, while rental growth across other capitals is continuing to trend higher.

Vacancy rates 

Domain’s data showed that Perth’s vacancy rates remained steady at a multi-year low of 0.7 per cent in August. Over the year, vacancy rates in the Western Australia capital have fallen by 30 basis points from 1 per cent in the same period last year. 

The tight rental market conditions in the city mean that tenants will be operating in a landlords’ market, which could continue to place upwards pressure on rents.

The areas with the highest vacancy rates in Perth were Perth City (1.5 per cent), Cottesloe – Claremont (1.2 per cent), South Perth (1.1 per cent), Melville (0.8 per cent), and Belmont – Victoria Park (0.8 per cent). 

Meanwhile, areas with the lowest vacancy rates in the city were Gosnells (0.2 per cent), Serpentine – Jarrahdale (0.2 per cent), Wanneroo (0.2 per cent), Mundaring (0.3 per cent), and Swan (0.3 per cent). 

Domain stated that lockdowns could potentially disrupt the rental conditions in the city, as past data shows rental markets usually see a strong increase in estimated rental listings when lockdowns persist for an extended period, which in turn leads to higher vacancy rates. 

Auction markets 

According to CoreLogic, a total of 63 properties were taken to auction in Perth over August. Out of the 61 results collected, the average clearance rate came in at 64.35 per cent.

Check Smart Property Investment’s News page for the latest weekly auction results. 

Outlook

With winter over and done with for another year, all eyes are on Perth and how its property market will perform as we transition into the traditional spring selling season.

Looking ahead, the REIWA said they expect further growth as the Perth property market enters the spring selling season.

“Given the current low supply and strong buyer demand, it looks like we will continue to see further price growth,” Mr Collins said. 

Mr Collins commented that the city’s market had gone from over-supply of stock to undersupply. He said that the housing stock was down to 8300 properties, which was very low by historical standards.

“We have under-built, we’ve gone from 2013-15 where we built too many houses, now that supply is pretty much gone, now we have under-built and it takes a long time with the trade shortage to get new stock to market, hence why we are now in an undersupply situation,” he said.  

REIWA expects a 15 per cent price growth for Perth in 2020-21, underpinned by the strong mining sector, low unemployment rate, and the low cost of money. The institute also expects growth to continue into 2022.