- Population growth supports Perth property prices, pressures rentals
- WA economic tailwinds boost property demand
- $356B potential investment in 181 WA projects
Strong population growth and ongoing investment are likely to continue supporting Perth home prices, however, it is putting rental markets under extreme pressure.
According to Urbis, Western Australia has a number of economic tailwinds that are likely to boost demand for property over the next 12 months.
According to Urbis, there are 181 projects in WA related to energy and natural resources, which have a potential investment value of $356 billion. Of this amount, $169 billion is attributed to hydrogen projects.
They said the economic activity has contributed to WA’s low unemployment rate of 3.4% and that Government investment in infrastructure such as Metronet and Edith Cowan University (ECU) will also lead to more jobs across the state.
Director at Urbis, David Cresp, said the economic strength of the state has helped property values hold steady as interest rates have risen sharply.
“We believe that the fundamentals for WA are looking positive and will continue to drive demand for WA residential property over the next 12 months,” said Cresp.
“We see that continuing demand and low stock level of existing houses on the market will lead to an increase in price pressures.”
David Cresp, Director, Urbis
Population growth hurting renters
This spike in population is continuing to put pressure on the already low vacancy rates with the March 2023 figures as low as 0.7%, compared to 1.2% at the same time last year and 0.9% in March 2021, according to REIWA figures, as cited by Urbis.
The low vacancy rate is hurting tenants with rents increasing by 47% to $550 per week. The return of international students has placed additional pressure on rentals in Perth too, with all of the purpose-built student accommodation in the western capital now full.
Over the past few years, the amount of rental stock advertised in Perth has been trending down and Perth is now experiencing the tightest rental market since 2013. Smaller households have also been a contributing factor to the lack of rental properties available in Perth, which has then been compounded by the sharp increase in inward migration to Perth.
Urbis said while new housing supply is on the way, the challenges of the Perth building market mean that completions have not been keeping pace with commencements.
Having said that, the building market is slowly gaining pace and will see completions continue if not increase at current levels, despite commencements decreasing.
Residential dwelling commencements and completions
Commencements and completions are rising
Director at Urbis, Tim Connoley, said that there is continued high levels of investor interest in Perth’s greenfield market, with first home buyer activity declining.
He said Perth residential land sales are on track to decline about 35% in FY23 from a strong FY22 due to a combination of sector capacity and interest rate uncertainty however, he is forecasting increases over the next two years.
Connoley said he is expecting easing capacity constraints on land delivery and construction, and the stabilisation of mortgage rates to support sales growth of about 30% in the next 12 months.
“Whilst there is undoubtedly global economic risks, declining 3-year fixed rate mortgages towards 4.5% later this year and population and rental pressures are likely to see an increase in demand from first home buyers for land over the next 12 months,” said Connoley.
