Why Perth still has a lot of growth in the tank
Property prices in Perth have surged over the last year. This might lead some to believe that the city is reaching the peak of its cycle.
But a closer look at the data reveals a different story: Perth still boasts a substantial reservoir of untapped growth potential. The key for investors is knowing how to find it.
Market cycles
While the market has flourished over the last year, it wasn’t always like this. Between the June quarters of 2015 and 2020, Perth endured a period of decline, with the median house price falling 11.5 per cent, according to the Australian Bureau of Statistics.
During the mid- to late-2010s, the city’s mining sector faced cutbacks, project delays and closures. This impacted employment, wages and investment in Perth. The local economy suffered as a result and property began declining in price. But government initiatives at the time helped stimulate the economy somewhat. By the time 2020 rolled around, Perth’s property market was ready to rebound: Perth has spent the last four years catching up to other capital cities that had grown consistently through the 2010s.
Affordability
Perth’s property prices, despite considerable increases over the last year, are still among the most affordable of the capital cities, indicating there is more room for growth.
For example, CoreLogic’s March home value index showed the median value of a home in Sydney was $1,139,375, Brisbane $817,564, Melbourne $778,892, and Adelaide $734,173. Perth was $703,502.
High demand
Two more key indicators further solidify Perth’s growth potential. First, the number of days properties spend on the market is very low, according to the Real Estate Institute of Western Australia (REIWA). In March houses were selling five days faster than the same time in 2023. Units were selling 11 days faster.
Second, the very tight rental market indicates a need for investment in rental properties. REIWA reported that the city hit another record-low in March with a vacancy rate of 0.4 per cent.
This increase in demand has been driven by population growth fuelled by the recovery of the mining sector, interstate migration and an overall strong job market. This is forecast to continue, with the state government expecting the city to grow from 2.6 million people now to 2.9 million people by 2031.
Smart investment
So, Perth’s fundamentals look strong, which should excite investors.
But, buyers should also remember that not all parts of the city have equal potential. Specific suburbs and even streets within those suburbs may significantly underperform the city average. That’s why it makes sense for investors to seek help not just from any buyer’s agent, but a local expert with on-the-ground knowledge.
Beyond numbers
Investing in an unfamiliar market requires an in-depth understanding, beyond just the numbers. There are several factors savvy investors should consider when researching locations, which won’t always be available online for interstate agents to find.
For example, a property in the catchment area of a well-regarded school may experience stronger price growth than a comparable property just outside the area. Having inside knowledge of the city’s school catchment areas and their reputations can help.
Also, a property on one street may outperform a comparable property on an adjacent street, due to factors like traffic flow, noise levels, proximity to amenities and development potential. A local buyer’s agent will have a detailed understanding of specific streets and their characteristics, having walked those streets themselves.
Boots on the ground
A local buyer’s agent will have strong relationships with real estate agents throughout Perth, which opens you up to buying off-market. A local buyer’s agent will also know who the best local building inspectors and conveyancers are.
Use local
Perth’s property market presents a compelling opportunity for savvy investors looking for long-term growth and high-quality tenants. While the Perth market has enjoyed strong growth of late, its relative affordability, low days on market and strong population growth suggest there’s still considerable growth left in the tank.
Using a local buyer’s agent, with knowledge of where, what and when to buy, will maximise your chance of getting top-quality property at a fair price.
Peter Gavalas is the founder of Resolve Property Solutions