- Supply shortage leads to increased demand for unit and strata properties as prices surge.
- Affordability and low maintenance make units appealing, with rental yields soaring to 6.31% in Perth.
- A scarcity of new apartments fuels the growth of established apartment sales in Greater Perth.
As Perth continues to face a drought of listings, homebuyers and investors have been turning to unit and strata properties as an alternative route to entering the market, according to Resolve Property Solutions buyer’s agent, Peter Gavalas.
Listings fall to all-time lows as prices surged
Data from The Real Estate Institute of Western Australia (REIWA) showed that the supply of homes for sale fell to its lowest in thirty years, with under 5,000 homes listed in September.
Perth total property listings
Gavalas commented that the dearth of listings was the main reason home prices were marching upward in Perth.
“With the current shortage of available homes in Perth, competition among buyers is fierce, resulting in homes selling in just nine days on average. This, in turn, is putting significant upward pressure on prices,” he said.
Perth’s median house value grew to $646,700 in September, a 9% rise from the same time last year, according to CoreLogic’s research.
Cheaper and low-maintenance unit and strata properties an attractive alternative
“While Perth is still one of Australia’s most affordable capital cities, some homebuyers are starting to find it more challenging to enter the detached housing market,” Gavalas said.
“This is where unit and strata properties come into play, as they typically offer a more affordable entry point.”
Demand for units has been firing up, with CoreLogic data showing that Perth’s median price was $437,800 in September, growing by 6.5% from the past year. Nevertheless, Perth’s unit prices remained well below that of houses.
Other than affordability, Gavalas said that unit and strata properties were also appealing because they had minimal maintenance requirements.
“The reduced maintenance responsibilities can be particularly appealing to investors, as it can translate to lower ongoing costs and potentially higher rental yields,” he said.
Indeed, Perth’s median rental yield for units was 6.31% over the September quarter, according to Domain’s figures, one of the highest across the nation.
Established apartment sales have been rising
Cygnet West’s director of valuation, research and advisory, Quyen Quach, told The Property Tribune that his firm was witnessing an uptick in established apartment purchases across Greater Perth.
Greater Perth apartment market transactions (Excludes off the plan)
“Recent Cygnet West analysis of the Greater Perth ‘Apartment’ submarket shows a continued strong volume of established product sales, as low new supply and high housing demand drive a resurgence in buyer activity,” he said.
Quach noted that the drop in new apartment sales and the ensuing rise in established apartment sales were due to a scarcity of new apartment completions over the last two years.
Metropolitan Perth apartment timeline (20+ dwelling projects)
“The decline in new apartment sales has been a direct result of the low completion volume in 2022 and so far in 2023.
“The anticipated increase in supply in 2024 is reasonably expected to underpin an increase in ‘New’ apartment sales as high-interest rates impact off-the-plan settlements and investor appetite to hold.
“In the ‘Established’ (‘Est’) apartment subcategory (dwellings that are over three years old), the preliminary quarterly median for established apartments grew 0.5% over the September quarter to $375,000; this is down slightly from a high of $383,000 in June 2022, after interest rates began to rise.
“However, an even deeper dive analysis showed an increasing proportion of older established one- and two-bedroom apartments were sold, suggesting compositional bias (whereby an abnormally high proportion of certain categories of products are sold during a particular period) may be contributing to recent median price volatility that is inconsistent with the strength of demand and transaction volume.”