- The western capital is growing as an investor favourite.
- Relative affordability and a strong local economy are among major drawcards.
- Perth's real estate market is red hot, with some interstate buyers significantly overpaying for Perth homes after battling it out in a bidding war.
Investing on the east coast has always been favoured amongst property investors, but during 2023 we started seeing a shift in focus to the west side as Perth started to show its potential, ending the year on top. According to Hotspotting’s ‘Price Predictor Index’, Perth finished 2023 as the best capital city in terms of price growth performance.
Many property experts are now focusing on what the Perth market has to offer, with experts predicting prices to skyrocket throughout 2024.
Why is the Perth housing market so popular?
- Economy;
- Prices;
- Supply and demand; and
- Migration.
An economy that’s kicking goals
Currently, Perth has shown it has a strong local economy because of increased overseas and interstate migration.
Western Australia provides almost one fifth of Australia’s Gross Domestic Product (GDP), equal to a Gross State Product (GSP) of $445.3 billion in 2022-23.
Unemployment levels are down, sitting at 3.8%, as the State currently has its highest levels of full-time employment, which then flows onto the property markets.
Recently released Australian Bureau of Statistics (ABS) figures show the Perth property investment market has hit a new high, with property investment lending in Western Australia topping $901 million during November 2023 – the highest monthly figure since December 2014.
Delivering bang for your buck
Compared to Sydney and Melbourne, Perth is where you can get more ‘bang for your buck’, with the prices of houses and units more affordable for both home owners and investors.
$635,000 can get you a 4-bedroom house in Perth, and for $ 390,000, you can get a two bedroom apartment.
If you have a cashflow investment strategy and want to invest in Perth, the strongest rental yields can be found around Banksia Grove, Westminster, and Marangaroo. Units in Bayswater are even receiving up to 9.7% rental yields.
Rental yields for Perth
If you are looking for areas with strong demand and a chance for capital growth; Joondalup, Orelia, Armadale, Wellard, Ellenbrook, and Brabham have been the choice for investors.
Weekly asking prices for Perth
Few new homes on the market
Property supply has been tight, which has caused property prices to rise and market experts to forecast 2024 prices to soar up to 10% over the year.
With more people employed, families have more disposable income, and more people can access financing to buy property, which drives up demand for housing and property prices.
Adding fuel to the fire, challenges in Perth’s construction sector means that supply levels are down. Throughout 2023, dwelling approvals and completions were at record low levels, resulting in demand outstripping the housing supply levels.
The rental market is becoming increasingly competitive, driving up rental prices meaning higher yields for investors. Unfortunately for tenants, REIWA figures showed that housing rents saw a 19.8% increase over the 12 months to September 2023, with no signs of any decreases on the horizon in 2024.
More people calling Perth home
WA’s pristine beaches have attracted a lot of attention from overseas and interstate migration.
Perth showed the highest migration levels across Australia. According to data from the ABS, WA’s population grew by 2.8% in the year to March 2023.
These new residents will need to find work, as well as somewhere to live, which puts further pressure on the supply of the housing and rental markets.
Compared to the nation’s east coast capital cities, Perth’s relative affordability has been a strong drawcard for migration.
The challenge of buying a home in Perth
In one word: location.
If you are an investor living on the eastern side of the country, it is neither easy nor cheap to fly to Perth to inspect property. If you are buying interstate, you must conduct very thorough due diligence, get a building and pest inspection done, and it is strongly recommended that you don’t buy any property “sight unseen”.
You need to be very mindful, that a lot of industry in Perth is driven by the mining sector. Of the $445.3 billion GSP, $200 billion of this was driven by WA’s mining industry. It is always best to avoid buying into areas that are heavily reliant on the performance of the mining industry and instead look into areas that have multiple industries as growth drivers.
Keep in mind that not all suburbs and properties will perform the same. It is important that you complete thorough research of both the property and the area, and really understand the demographics of the area you want to buy.
Investors should factor in the cost of stamp duty when investing in Perth. This is a tax levied on property purchases, and the amount varies depending on the property’s value and location. In Western Australia, the stamp duty rate ranges from 1.9% to 5.15% of the purchase price.
With affordability issues on the rise in Perth, there is a limit to what tenants can afford and it is likely that a lot of the growth in rental yields will be reflected in units.
There is a risk that some investors might pay too much in order to secure a property, particularly if an investor becomes emotional and gets FOMO (Fear Of Missing Out). The Perth property market is now becoming too hot and interstate buyers and marketeers are now paying ridiculous prices for Perth properties after engaging in bidding wars against each other.
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