Perth’s property market has been experiencing an extraordinary boom in 2024, with prices outpacing most of the country. CoreLogic’s latest home value index indicates that Perth’s property prices rose by 24.4% in the year to August, outstripping a stagnant Melbourne for median dwelling values. This surge raises the question of whether Perth’s property is now unaffordable for many buyers and whether the boom will eventually end.
Demand in Perth, especially in outer suburbs, remains intense, with properties often selling before they even hit the market. The competition, driven by interstate buyers and Perth buyers agents, has caused asking prices to surge well beyond expectations. Currently, nearly 90% of homes are selling above the listed price, compared to only 12% selling below asking price during the last boom in 2013-2014. This has fueled concern over long-term affordability, particularly as rental yields and house prices continue to rise. However, Perth buyers agencies continue to highlight growth opportunities, especially with strong rental yields attracting investors.
It’s now common for properties to sell for six figures above their listed prices, and nearly 90% of homes are selling above the asking price. This level of activity surpasses the previous major growth phase of 2013-2014, where 45% of homes sold for less than the asking price compared to today’s 12%.
Parallels with past Perth property booms
Perth’s housing market bears striking similarities to the growth it experienced in the early 2000s. The current landscape is seeing low listings, record-low rental vacancies, and increasing rental yields, with only high interest rates offering any restraint. However, as interest rates are expected to stabilise or even decline in the coming years, the market could face sustained pressure, further driving prices upward.
The significant increase in house prices has had a big impact on housing affordability. According to the Real Estate Institute of Western Australia (REIWA), the proportion of family income required to meet loan repayments in WA rose to 39.5% in June 2024, up from 34.7% the previous year.
This increase is largely attributed to a combination of rising property prices and the substantial impact of multiple interest rate hikes that occurred over 2023. REIWA notes that mortgage repayments have increased by nearly 50% over the past year, exacerbating affordability challenges for many families.
Despite this decline in affordability, WA remains one of the most affordable states for homeownership. Only the ACT and the Northern Territory boast lower proportions of family income required for mortgage repayments. By comparison, New South Wales continues to be the least affordable state, with homebuyers needing nearly 58% of their income to cover mortgage repayments.
Perth still offers growth opportunities
The price surge in Perth comes after years of relatively stagnant growth, particularly when compared to other major Australian cities like Sydney and Brisbane. As a result, while Perth’s prices have risen significantly, they are still below those in many other capital cities.
This underperformance in the previous decade has given Perth room for continued growth, and experts believe the market has not yet hit its affordability ceiling. Analysts predict that while growth may slow in 2025, buyers and investors are unlikely to benefit from delaying their purchases.
Investors eye strong rental yields in Perth
The appeal of Perth’s property market is not limited to homebuyers. Investors have been drawn to the strong rental yields and low vacancy rates in the city. CoreLogic data shows that Perth is now second only to Darwin for unit rental yields, and is third nationally for house rental yields. The city’s economic growth, driven by a strong job market and population increase, has created a solid foundation for further property demand, which should help stabilise the market despite potential volatility.
Loan activity in WA has also increased despite affordability concerns. REIWA reports a 13% rise in loans to owner-occupiers over the June 2024 quarter, with first-home buyers accounting for 38.1% of the market. This shows the strength of the WA market, even as the average loan size continues to grow. Buyers agents and buyers agency services in Perth continue to play a significant role in driving property competition.
In many ways, the current state of the Perth market should probably be a bit of a warning to investors. We’ve seen many Perth buyers agents driving up prices with heavy interest from Eastern States investors. This is very much the same scenario we saw back during the last boom. What followed was a period of prices going backwards.
Will we see the same thing this time? It’s hard to say. But what we do know is that most likely the biggest gains have already been made in Perth.
