Article written by Matthew Hughes, Capital Property Advisory.
In a recent discussion on The Real Estate Podcast, we explored some exciting projections about Perth’s real estate market. Notably, a reputable source predicts a potential 20-30% growth in property values over the next three years, signalling what could be a remarkable phase of growth for the region.
Perth’s Property Market: Poised for Exceptional Growth?
A prediction by a prominent former President of the Real Estate Institute of Western Australia (REIWA) suggested that Perth could see a substantial 20 to 30 percent rise in property prices within three years. He has since updated his comments in a subsequent article, suggesting that Perth property values could spike a further 40% in the next five years, resulting in a median house price above $1 million in 2029. Given his historically conservative outlook, this forecast is a particularly interesting one. This potential growth is attributed to a “supercycle” fueled by a severe shortage of housing – a situation aligning with our analyses indicating that Perth’s property values are notably undervalued. While these predictions require time to unfold, the signs pointing towards an ongoing and substantial market upswing are strong and clear.
Challenges in Meeting Housing Demand
The property industry currently faces a significant challenge in meeting the demand for new homes. Production rates are struggling, with only 4,000 to 4,500 new dwellings being completed quarterly, far below the needed 10,000 to keep pace with population growth. The high cost of construction, lengthy build times, and a shortage of skilled tradespeople – compounded by competitive pressures from other sectors – highlight the urgent need for innovative approaches to boost housing supply effectively. Very recently we have seen WA leading the recovery for new dwelling starts nationally, and although this is welcome news, it is a drop in the ocean when compared to the actual number of new dwellings required to bring balance back to the market.
Western Australia’s Rapid Population Growth
Driving the demand for housing is Western Australia’s rapid population increase, now the fastest nationwide, with a 3.3 percent rise in the year ending September 30. Predominantly driven by overseas migration, which represents 83 percent of this growth, there is a pronounced disparity between the demand for housing and the rate at which new homes are being approved. This mismatch underscores the ongoing housing shortage that will only exacerbate if not addressed.
Strategies for Success
To navigate these challenges, it is important to capitalise on well-established agent and seller networks and the potential of pre-market and off-market opportunities. Our extensive connections and deep understanding of the market enable us to secure premium properties for our clients, often negotiating advantageous terms and timeframes to suit the seller, rather than focusing on price considerations alone. While maximising sale price is important to all sellers, in this market, flexibility to allow a seller to remain in the property under a long settlement scenario, or a flexible lease-back, can be the difference between us and other competitive bids.
In summary, while the Perth property market presents notable challenges, it also offers exceptional opportunities for astute investors seeking further capital growth and nation-leading yields.
