Article written by Matthew Hughes, Capital Property Advisory
This time last year, our outlook was one of cautious optimism in the Perth property market, a view that was guided by a rental market boasting near-zero vacancy rates and showing promise of future growth in rental returns.
Our optimism was not misplaced; in fact, the historically low levels of stock in both rentals and sales outstripped even the most bullish forecast, leading to a marked upward pressure on prices.
Perth house prices have surged more than 18 per cent in the past year, and even more in regional WA, according to CoreLogic, with the median value of a home in Perth now standing at $525,000.
The post-COVID “FOMO” feeling does appear to have diminished in recent months, and the market has begun to hold steady in many outer suburbs. However, the same cannot be said for premium, built-out suburbs close to the CBD or the coast, which are still running hot, with continuing low supply, and we expect strong growth in these areas to continue through 2022.
REIWA supports this view, tipping prices to jump around 10% next year, despite a recent announcement by the Commonwealth Bank, which claimed anticipated interest rate rises next year would lead to only moderate price growth. However, CBA’s forecast was based on the Reserve Bank boosting the cash rate to 1.25 per cent in the next two years. Whilst interest rate rises are inevitable, small incremental increases coupled with some minor intervention from APRA should have the desired effect in slowing down the East coast capital cities, but is not likely to have the same effect in far more affordable and affluent WA.
Western Australia can also expect a sharp increase in demand when borders open next year, further increasing the gap between supply and demand and kicking our growth cycle back into gear. With recent positive interstate net migration while enforcing one of the tightest borders in the world, we are expecting population growth to kick back to pre-pandemic levels or beyond, quite quickly.
Our booming resources industry currently boasts $170 billion of projects in the pipeline, expected to create over 50,000 new jobs, which, together with the comparative affordability of housing, will be a big drawcard for those in the east and overseas.
Interestingly, the stigma of isolation has turned into a positive post-pandemic; anecdotally, we have been buying record numbers of houses for east coasters in preparation for their move to (or back to) Perth when they are able.
All in all, there are many reasons to support a positive outlook for 2022, with more moderate growth expected to flow through into 2023.
