Perth housing demand continues to outweigh supply, as the number of listings for sale in September further decreased. Our team reflects on some of the key trends influencing the market across the month, including why Perth is still one of the most affordable states in the country.
Perth supply continues to tighten
There were only 8,116 properties listed for sale across Perth during the week ending 2 October 2022, which is down from 8,160 four weeks prior and 8,360 in the same week 12 months prior. With the rise in construction costs and skilled labour shortages, along with population growth in WA, we anticipate it will be some time before supply catches up with demand.
Despite recording a dip in the median dwelling price in September, the median dwelling price over the last 12 months is still ahead by 4.1% (CoreLogic Home Value Index).
Source: REIWA and Momentum Wealth Research
WA remains one of the most affordable states for housing
Despite the recent interest rate rises, WA’s average ratio of income to mortgage repayments remains much lower than in other states. This figure suggests that there is greater capacity for Perth households to absorb the rate increases when compared to other property markets across Australia.
During the June 2022 quarter, mortgage repayments accounted for 28.2% of WA residents’ incomes compared to 47.7% in NSW, 39.7% in Victoria and 34.8% in Queensland. The below chart from the Real Estate Institute of Australia provides a snapshot of the national housing affordability ratings for each state recorded during the June quarter.
Source: Real Estate Institute of Australia
Perth market sentiment positive
A survey conducted by ANZ and Property council revealed that sentiment towards the 12-month housing growth outlook is negative across the country, with the exception of ACT which is stable and WA which is positive. This mirrors the findings of our Property Sentiment Survey conducted earlier this year, with Perth emerging as the most popular location amongst buyers actively looking to invest in 2022.
Source: ANZ/Property Council
Perth’s rental property supply shortage continues
Perth’s median rental house price has risen to $500 per week over the past 12 months, which is an 11.1% increase from September 2021. The decline of homes available for rent in Perth has continued this month, with only 1,724 properties listed for rent during the week ending 2 October 2022, down from 1,905 four weeks prior and 2,236 from the same time last year (REIWA, 2022). The continued downward trend in the supply of rental properties has caused vacancies to follow a similar pattern, reaching 0.6% in September (CoreLogic, 2022).
Contraction of dwelling commencements
Despite the Government announcing a new additional supply of land, rising construction costs and a shortage in skilled labour are causing the supply of new dwellings to stagnate. This contraction is more prominent in the construction of houses which were originally inflated by the Government construction stimulus packages released at the beginning of the COVID-19 pandemic. The Australian Government is establishing various initiatives to address the skilled labour shortage with the Jobs and Skills Summit held at the beginning of September to outline a number of initiatives.
Perth’s housing prices combined with its strong economy and population growth will likely lead to further strong demand as we head into the active warmer months.