Perth Property Leading National Capital Gain
By Hayden Groves
Data house Core Logic’s latest housing price index figures reveal what many property commentators expected; that Perth property values now lead the nation in terms of capital gain over the past twelve months.
Off the back of more moderate property value increases comparative to east coast cities during the property rush of early to mid-2020, Perth was better positioned to weather the storm of 12 successive interest rates rises in fifteen months and the resulting impact on property values. For the twelve months ending June 2023, Perth is the only capital city to record annual growth with dwelling values up 2.5 percent and moving 2.8 percent for the quarter.
Somewhat remarkably, Sydney’s housing values increased an impressive 4.9 percent in the June quarter off a very high base, but have pulled back 8.0 percent from its peak prices in January 2022. Across the year Melbourne is off 5.7 percent, Brisbane backed off 8.2 percent and Hobart has declined the most by 12.7 percent. Overall, evidence is emerging that Australia’s property values are trending back towards a growth phase with almost every capital returning positive gains last month and quarter.
Perth is well positioned for property price gains
Property values are rising despite a high inflationary environment, higher interest rates and low business confidence off the back of increased immigration levels and low listing supply fuelling demand. Sales volumes have decreased across the year, down 20.3 percent nationally, with the three big east coast capitals’ transaction levels tracking below the national average. Perth’s property sales activity has only declined 3.2 percent last year, the lowest fall in the nation.
The interplay between sales volumes, listing availability and property values provides useful insights into likely future market behaviour. Listing stock continues to trend downwards, dropping 13.2 percent from last year and 28.7 percent lower than the five-year average. Lack of housing supply is the key driver of property values in today’s market. In Perth, total listings are down a massive 30.3 percent compared to last year and new listings coming to market are off 18.7 percent.
With such short listing supply, population gains driving demand and relative affordability, Perth is well positioned for property price gains in the short to medium term.
Meanwhile, national rents look like they’ve peaked growing by 9.7 percent year-to-date, down from the twelve-month peak of 10.2 percent for the 2022 calendar year. REIWA reported an uptick in vacancy rates to 0.9 percent last month, some welcome relief for tenants looking for a home.
I see the biggest challenge for the housing market being the rate investors are selling their property assets, homes that provide rental housing. The decade average of investor property sales is 25 percent of all property sales. This has risen sharply since January to sit at 32.7 percent. Anti-landlord sentiment fuelled by the Greens and others for political purposes and higher interest rates is seriously damaging rental supply.
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Apr 4, 2024
Perth Property Takes Lead
It doesn’t seem that long ago when Perth’s property values made us the cheapest major capital in the nation. At the time, it failed to make any sense that Hobart and Adelaide’s median house prices were significantly higher than ours given our low unemployment, high wages, lifestyle and economic strength. Two years ago, Perth’s median home value for the March quarter was reported by Core Logic as $525,800. The current median house value for Perth as reported this week sits at $703,502. In March 2022, we were the most affordable place in Australia to buy real estate with all the evidence pointing to Perth being on the brink of a property boom. Back then, buyers dabbling in the Hobart property market parted with $820,000 during the quarter, in our nation’s capital they paid $982,000 and in Brisbane $760,000. In Darwin, the median house price reached $583,000 and Adelaide put on a tremendous 7.1 percent spurt from the previous quarter to reach a median of $649,000. Melbournian buyers paid a median of $1,121,500 for a detached house and Sydney topped the list with an extraordinary median of $1,590,900 for the quarter. Perth’s median house price growth for the twelve months to March 2022 was 4.1 percent. Compared to the same twelve-month gains had in Hobart (31.5 percent), Brisbane (26.7 percent) and Adelaide (24.8 percent), Perth’s property price gains back then were comparatively modest. Perth’s annual house price growth is now a nation-leading 19.8 percent and showing no signs of slowing. Brisbane sits in second place at 15.9 percent, Adelaide 13.3 percent and Sydney (somewhat remarkably given their high median price) has put on a further 9.6 percent. Remaining capitals are still growing but by less than 3.5 percent. Usefully, Core Logic’s statistically references ‘series peaks’ demonstrating current market sentiment within the context of a ‘since -COVID’ cycle. Brisbane, Adelaide and Perth are the last remaining cities to be at peak since that time with Sydney, Melbourne and Hobart all having peaked in early 2022. It would appear Perth has some way to go with Adelaide’s median home value at $734,173, and Brisbane’s – the capital most typically value-aligned with Perth – at $817,564 with both still growing. I predict Melbourne will continue to constrict from its current $778,892 median value, Hobart’s anaemic growth at 0.3 percent could turn negative at the year progresses and Sydney’s growth pattern will stall. I punt Adelaide is close to peak growth and whilst remaining positive will only gain 5 to 8 percent over the next twelve months and Brisbane should continue its double-digit performance for the remainder of 2024. With Perth gaining 1.9 percent in March and 5.6 percent for the quarter, we could see gains of around 22 percent this year. Meanwhile, local rents are up 13.7 percent for houses and 15.9 percent for units. Housing affordability has deteriorated and will get worse before more supply arrives.
Mar 20, 2024
Selling to Buy
Supply of homes to buy remain well below the long-term average. REIWA reports 3,971 listings available broken down into 2,230 houses, 1,129 units and 612 vacant lots. This time last year there were 7,262 listings. Meanwhile, sales volumes last week were 1,036 metro-wide up from an average of 615 weekly transactions in 2019. The lack of supply and listing choice is exacerbated by would-be sellers’ lack of confidence in coming to market, fearful of not being able to find a property that meets their needs once they’ve sold. And, given the high levels of demand, offering to buy ‘subject to sale’ of their own property is often trumped by buyers without such buying terms. Normally, sellers would rely on moving to a rental property for a short period in the event they’ve sold and yet to find an alternate home. However, the rental market is tighter than the sales market with median rents at $640 per week up from $360 per week in 2019. A mere 1,817 properties are for lease on reiwa.com and vacancy rates are at less than one percent. So, how do sellers overcome this dilemma? Firstly, be ready to come to market at short notice. Once you’ve chosen your preferred agent, present your home and arrange for professional photography. That way, your agent will be ready to go to market within a day or two should you successfully buy. Secondly, if you decide to sell and need to buy, structure the sale contract to give you sufficient time to buy an alternate home by negotiating a longer settlement period. Thirdly, consider a negotiating a ‘rent-back’ period with your buyer. This may not suit the buyer of course, but if an investor ends up buying your property, then this option comes into play. At settlement, sellers can remain in their home, pay rent to the buyer and have the luxury of only needing to move once upon finding their next home. Fourthly, introduce yourself to as may agents as possible when searching for your next home, give them your contact details and let them know what you’re looking for. This gives you more chance of securing a home ‘off-market’ whereby more flexible terms around settlement and the like are common. Finally, have confidence you’ll find a suitable home after you’ve sold. Sure, you’re not likely to be spoilt for choice and you may need to compete to buy, but there’s sufficient stock coming through the market to meet most family’s needs.