Why Perth’s property prices may not go backward anytime soon
Despite an improvement in dwelling approvals, housing affordability won’t see much improvement in Perth in the near term.
That’s according to Peter Gavalas, a buyer’s agent of Resolve Property Solutions, who said: “We still have a significant supply deficit in Perth compared to population growth.”
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Noting there had been a marked increase in dwelling approvals over the past few months, he conceded “this was coming off a low base”.
He was pointing to the Australian Bureau of Statistics (ABS) data that reported a 19.6 per cent improvement in total dwelling units approved across April and May this year.
From his perspective, prices aren’t likely to fall as a result of the new supply, given population growth “remains a key driver”.
“Perth has seen significant population increases over the past few years, largely due to its relatively affordable cost of living and economic opportunities compared to other major Australian cities,” he said.
According to the ABS, Western Australia recorded the largest population growth across the country in 2023 – a lift of 3.3 per cent. This has been fuelled by interstate migration and a “flourishing” economy.
The Centre for Population has gone one step further, projecting an annual growth rate of 1.4 per cent over the next decade.
According to Gavalas, “this influx of people continues to outpace the number of new homes being built, maintaining high demand for housing and will continue to do so”.
It’s led the buyers agent to warn that even if things turnaround soon, and more approvals do come to fruition, “it would still take time before these properties were built, which means Perth’s supply shortage is unlikely to be solved anytime soon”.
“For this reason, price growth in Perth is unlikely to flatten out in the near future,” he advised.
While new homes trickle in, the cost of construction is only hampering supply woes even more.
“Construction costs have soared, driven by a combination of material price hikes, interest rates and labour shortages,” Gavalas said.
That’s affirmed by data from CoreLogic’s residential construction costs report, which showed it’s 30 per cent more expensive to build or renovate now that it was prior to COVID-19.
“This is translating into new builds being priced out of reach for a large segment of the market,” Gavalas continued.
It’s also being compounded by the fact that established home listings are also down, “partly due to the uncertainty in the market and the difficulty in finding a new home once they sell. This reduces the overall availability of housing and further intensifies competition among buyers”.
“With fewer homes available for purchase, and little in the way of new builds, it’s no wonder there has been such upward pressure on property prices over the last year,” he concluded.