- 1.1% rise in April saw median dwelling house prices reach a record new high
- Previously, the market peaked in June 2014
- So far this century, employment levels in mining and construction have correlated strongly with house price growth
With headlines of the past week dominated by rising interest rates, and the beginning of a decrease in dwelling values across the eastern coast, it may come as a surprise that Perth’s property market has slowly reached a record new high.
According to CoreLogic, a 1.1% rise in values through April took market values 0.9% higher than the previous record, from June 2014, at $552,128.
This means it has taken 94 months for the Perth market to recover from its previous high.
Since the pandemic, Perth’s dwelling values have risen by a cumulative 24.5% from June 2020 to last month.
Index Median Dwelling Value
It should be noted that Perth’s median dwelling have followed extreme cyclical movements in line with the nature of Western Australia’s boom and bust resource sector.
House prices for example more than doubled between January 2000 and January 2007, which coincides when private business investment associated with mining doubled. Employment growth in the sector also increased by 73% between February 2000 and February 2007.
Mining and Construction Employment Growth
Perth even had a brief stint as having the highest median dwelling value of any capital city between 2006 to 2008.
Although the global financial crisis began in 2008, and there was some disruption to employment activity, the high levels of demand for commodities remained until the mid-2010s.
Following a steel glut in China, demand for iron ore reduced significantly. Fortunes reversed, with unemployment surging to 7.1% in March 2018 (then a 16-year high) with the state’s population turning negative.
Based on the indexed median dwelling value, $95,000 was lost over a period of 5.3 years, with values not much higher than they were since 2006.
Outlook for Perth
The recent surge in growth has been led by the housing market, with units still 13.6% below the high seen in September 2013.
Although prices cooled during the end of 2021, a resurgence was witnessed through the March 2022 quarter.
Rolling Quarterly Growth
Mining employment should continue to rise given global commodity export disruptions fuelled by the Russian invasion of Ukraine.
A tight labour market, however, may prevent these gains from being fully realised.
Despite all of this, Perth remains relatively affordable, with the second-lowest dwelling value of the capital cities (behind Darwin).
A short term increase in demand from the investor segment may also occur, with rental yields across Perth averaging 4.4%.
CoreLogic’s Eliza Owen noted that Perth’s rental yields are the highest of any state capital.
“The city arguably has better prospects for medium term capital gains, and a low buy-in price,” she said.
“Lending indicators data from the ABS show investors currently comprise only 25.7% of mortgage demand in WA, well below the national average of 35.2% and the second lowest proportion of investment activity across the states and territories after Darwin.”
Ms Owen added that while several tailwinds may suggest a continued upswing for the Perth market, monetary policy tightening may be a “blunt force for housing demand.”
“Perth may eventually follow other Australian markets into a broad-based downswing as a result, just as record-low interest rates aided the recent recovery,” she concluded.