If you’ve been following property news, you’ve probably seen a number of articles proclaiming Perth as “Australia’s hottest capital city property market” and a “‘hunting ground’ for property investors”.

So why is Perth getting so much attention, locally and interstate? In this blog, we explore the factors that have contributed to the Perth property boom, as well as things to consider before investing.

Why is the Perth property market booming?

1. Strong economy

WA’s Gross State Product increased by 3.5% in 2023, surpassed only by SA and NSW. This was driven by positive performance across all WA industries (particularly mining), except for retail, which is still suffering due to cost of living pressures.

On another positive note, WA unemployment remained low and steady at 3.8%. This bodes well for the state’s economic outlook, with high employment rates meaning that people are making more money and have higher levels of disposable income. As a result, they are better equipped to invest in property.

2. Population growth

In the first half of 2023, over 73,000 people moved to WA. At the same time, the state is building approximately 14,000 new homes per year. Based on analysis by REIWA CEO Cath Hart, 30,000 new homes are required to house these new WA residents, indicating demand is being drastically underserved.

This disparity is likely to become more pronounced as time goes on, with building timelines slowed down by labour capacity, supply chain issues and infrastructure costs, and building approvals increasing only marginally despite huge demand.

Combined with existing local demand, this undersupply of housing has seen property and rental prices increase significantly, with no sign of slowing down.

3. Affordability

Though Perth renters and property hunters are undeniably feeling the squeeze, the city remains one of the most affordable places to buy property in the country. This is borne out by the proportion of family income needed to meet loan repayments, which was 34.5% in WA at the end of the September 2023 quarter, compared to 56% and 45.1% in NSW and VIC, respectively.

At the same time, WA mortgage repayments are among the lowest in the country, with TAS and the NT being the only state and territory with lower rates.

4. Sales prices and rental yield

There are a number of factors driving property prices in Perth, including limited supply and a slowdown in the construction of new homes. This has created a sweet spot for sellers where prices are high enough for them to clear a healthy return on their property, but not enough to be prohibitive. As such, there is a lot of competition between buyers and little room for them to negotiate prices, creating a seller’s market. By the same token, rental prices have continued to rise due to an incredibly tight rental market, with vacancy rates remaining historically low (0.7%) at the end of 2023, leaving tenants little room to bargain.

All that being said, Perth’s median house selling price ($595,000 at the end of 2023) is still among the lowest in the country, surpassing only Darwin at $590,000. Compared to the east coast, especially Sydney and Melbourne ($1,578,000 and $934,000, respectively), this makes Perth particularly appealing to interstate buyers who may be looking for a more affordable seachange or to invest in a property market with impressive rental yields.

Doing your due diligence as an overseas or interstate investor

The factors we have looked into all indicate that the Perth property market is prime for investment. Nevertheless, it’s important to approach any investment decision with both eyes open. Make sure you undertake your own due diligence, especially if you’re not familiar with Perth’s prevailing property trends.

Further, while east coast investors have been disproportionately buying up property in outer metro areas like Armadale to capitalise on rental yields, the pendulum is bound to swing back eventually. Why? Many of these purchases are converting owner-occupier dwellings into rental properties. This means more properties are entering the rental market, which will ultimately have a negative impact on the rental yields that justified the purchase in the first place.

All that is to say, though it is a great time to invest in Perth property, prospective investors should approach any purchase with an awareness of the ebb and flow of the property market.

If you are interested in entering the Perth property market but are unsure where to start, we’re here to help. Get in contact with us; we’d be happy to help you with any questions you may have.