- While house prices have declined nationally, the Perth market remains relatively resilient
- Prices are expected to increase slightly this year thanks to a strong economy and affordable pricing
- The rental market is set to tighten, although the return of investors and new house builds may bring some relief
Despite falling house prices nationally, the peak Western Australian real estate industry body said it expects price growth to continue in Perth this year, albeit at a lower rate.
More specifically, The Real Estate Institute of Western Australia (REIWA)’s outlook for 2023 has said it expects house prices to rise between 2% and 5% in the next 12 months.
Other forecasts also suggest the Perth property market will remain fairly stable.
“Perth’s median house price rose 2.86 per cent to $540,000 in 2022, up from $525,000 in 2021 – this was despite the eight interest rate rises which have seen east-coast markets go into decline,” REIWA CEO Cath Hart said.
“Perth remains the most affordable capital city by median house price, and while prices have risen in the past two years, in many areas they are still below the previous peak in 2014/15.
“Perth’s forecast price growth in 2023 will be supported by ongoing low supply and strong demand.”
How will the Perth sales market perform in 2023?
Data from REIWA showed that sales activity remained strong in Perth in 2022. The average weekly reported sales figure was 895, up from 870 in 2021.
“We anticipate sales volumes to remain at about this level in 2023,” Ms Hart added.
“Current listing levels are 10 per cent lower than they were this time last year and almost 34 per cent lower than what they were three years ago.
“As building completions increase over the next 12-18 months we anticipate listings will start to increase, however they will remain below historic averages.”
Thanks to population growth, demand for housing is expected to remain strong.
“Any increase in new listings will be offset by population growth,” Ms Hart said.
“WA’s population grew 1.3 per cent in the year to June 2022 and the State Government’s recent Mid-Year Budget review forecast further growth of 1.5 percent in 2022/23. As more people arrive in WA, this will maintain the demand for housing and keep listings low.”
Cath Hart, REIWA
Given current market expectations, interest rates are likely to have a minimal impact on the WA market compared to the eastern states.
“WA buyers have become more cautious and price sensitive following eight consecutive interest rate increases in 2022,” Ms Hart said.
“But so far, the local market is weathering interest rate changes well, supported by a strong economy, low unemployment and continued population growth.
“In addition, housing affordability has allowed buyers and mortgage holders to absorb interest rate rises.
“We are closely watching what the RBA does but are cautiously optimistic for the outlook in WA over 2023 based on current conditions.”
How will the Perth rental market perform in 2023?
Ms Hart noted that it had been another challenging year for tenants.
“Rental listings hit a 12-year low at the end of September and while they improved in the last few months of 2022, they remain nearly 17 per cent lower than this time in 2021,” she said.
“The vacancy rate lifted slightly during the year before dropping back to 0.7 per cent and the median weekly rent was $500 at the end of November, which was $60 higher than a year ago.”
Data SQM Research shows how tight the Perth rental market is, with a lower vacancy rate than even during the last mining boom.
Greater Perth
Ms Hart said that similar conditions are expected in 2023, given positive net migration.
However, she expects some positive signs this year.
“After seeing investors leaving the market in the past two years, with more than 18,000 fewer rentals in the market now since the peak in January 2021, we are starting to see some improvement in investor interest, particularly from Eastern States investors who see value in WA’s house prices and the potential for strong rental returns,” she said.
“This is a positive indication in regard to boosting rental stock levels but will take some time for the impact to be felt.
“Rental listings will remain low in the medium term but are expected to improve over the next 12-18 months, as both building completions and investor activity increase.”
Nonetheless, she said the proposed changes to the Residential Tenancies Act (RTA) are still a concern.
“The rental shortage is a critical issue,” Ms Hart said.
“We desperately need more investors in the market to help provide housing and keep rental prices affordable. Changes to WA’s tenancy laws that discourage existing owners and would-be investors will make an already tough situation worse.
“REIWA has been working with the State Government to achieve a sensible outcome to the RTA Reivew that is fair and equitable for all parties.”
How will regional WA perform in 2023?
Outside of Perth, Ms Hart said she expects the regional markets to remain strong, especially the southwest.
“All regional centres saw median price growth in 2022, with Busselton the top performer,” Ms Hart said.
“It has been a consistently strong performer over the past few years, both quarterly and annually, which is driven by population growth.
“There are three mining companies that fly out of Busselton, so the area is attracting FIFO workers who come down to enjoy the lifestyle.
“Regional areas have also benefited from an increase in the work-from-home/micro business trend; the idea of having to live where you work has changed significantly post-COVID.”
Ms Hart said lifestyle is expected to be the driving factor for where people choose to live in 2023, especially If there are local opportunities in regional areas.
“We have some of the most affordable housing in the country, especially in our regional towns,” Ms Hart said.
“They offer enviable lifestyle opportunities and are likely to attract strong demand from buyers as WA’s population continues to grow.”
