- Economic conditions and low interest rates have fed into a Perth property boom
- After six years of downturn, prices are already rising, up 3.8% in past quarter alone
- REIWA President has predicted 20% to 30% rises over the next few years
Buyers across the country are enjoying historically low interest rates and improved economic conditions, which is feeding itself into property price rises.
After six years of downturn, the Western Australian housing market has recovered well with house prices rising 3.8% over the past 3 months.
Recently, REIWA President Damian Collins said that prices could rise 20% to 30% over the “next few years” but that would only be putting them back to 2014 levels.
There has also been a noticeable improvement in buyer confidence, according to the latest quarterly ‘Risks & Opportunities Report‘ from Riskwise Property Research.
“Historically there has been a strong correlation between movements in interest rates, investor activity, and property price growth,” said Doron Peleg, CEO of Riskwise Property Research.
“As we forecast last year, the correlation will reassert itself this year leading to strong price growth … especially for family-suitable properties,” Mr Peleg said.
The report found that government stimulus support was a key driver in the improved economic conditions, improved consumer sentiment, and, finally, renewed demand for housing.
A sustained weakness in the housing market since the end of the mining boom had led to continued price reductions. This had made Perth the most affordable capital city housing market in Australia with a median house price of $475,000.
Roll on to 2021, and ultra-low interest rates have made it cheaper to buy than to rent a house from a cash flow perspective in Perth.
Meanwhile, anticipated price increases are in the 6% to 10% range, particularly for the mid and high end of the market.
Popular areas that have shown resilience in the past year, such as Perth-Inner and Perth-North East, are highly likely to enjoy stronger demand in 2021.
Generous government grants for first home buyers are likely to increase the supply of new affordable houses, applying some downward pressure on house prices. Hence, at this affordable end of the market, price increases might be contained to 4% to 8%.
Finally, the report noted that without structural change to the WA economy that will deliver a large number of high paying jobs and substantially increase population growth, only a moderate price growth is projected over the long term.