Capital gains are often the main game for property investors, so we’ve identified Perth’s top performing suburbs for value growth in 2021 – and what makes them so special.
A location that delivers robust long-term price growth can be the holy grail for investors. Get it right, and you stand to make a substantial profit. Make the wrong choice, and you could earn below market returns.
While past returns are no guide for the future, some locations have what it takes to deliver healthy price growth over time.
With this in mind, we’ve analysed data from the Real Estate Institute of WA (REIWA) to reveal Perth’s top performing suburbs in 2021.
Daglish tops the league table for gains
As our table below shows, Daglish takes the prize as Perth’s second best-performing suburb for capital growth over the 12 months to September 2021, but stands out as the strongest performing suburb from our top-ten table when it comes to longer-term performance. The 1-year gain – an impressive 50.3%, takes the median house value to over $1.3 million. Despite the price tag, homes in Daglish are being snapped up by buyers in just six days.
Jennifer Wakeman, General Manager of Momentum Wealth says, “There are key drivers that explain Daglish’s outperformance.
“Located just 4 kilometres from the city centre, the neighbourhood has close proximity to the employment nodes of the CBD and Subiaco. This underpins demand from tenants (mainly young people and families), who are also looking to be near Kings Park and other attractions. This appeal is a key factor behind Daglish’s 10-year price growth of 56.4%.”
Highgate tops the table for price growth in the year to November 2021 with recorded 1-year gains of 58.7% – higher than Daglish, though it lags on longer term growth, with prices rising 32.6% over the past decade.
Said to be Perth’s smallest suburb, the exclusive Highgate enclave comes with a median house price of $904,600.
Rounding out the top three suburbs, Claremont is a regular among the REIWA’s weekly list of top-selling suburbs. “The median price tag of $1.8 million-plus does put Claremont amongst Perth’s most expensive suburbs,” says Jennifer. “However, this premium location has provided investors and homeowners with 1-year price gains of 40.4% and 10-year capital growth of 39.3%.”
What do Perth’s top selling suburbs have in common?
The common thread across all top 10 locations for capital growth is that they are high-end, premium suburbs.
“This reflects the market recovery in Perth, which has been driven by owner-occupiers to date. Homeowners have seen their equity rise, and many are seizing opportunities to upgrade into blue ribbon suburbs,” observes Jennifer.
“In addition, we’re seeing strong demand from returning expats seeking homes in premium suburbs with an appealing combination of lifestyle plus proximity to the Swan River and the ocean.”
The top 10 neighbourhoods all offer easy access to quality schools, green spaces including golf courses and parks, and nearby employment centres. This is driving high volumes of online views for these locations, and leading to selling times that are typically below the city-wide average.
Supply factors support value growth
“Homes in our table of top 10 growth locations tend to be tightly held,” explains Jennifer. “Properties rarely come onto the market, and there are very few lots approved for future development. This creates scarcity, and when coupled with strong demand, it is inevitable that values will rise.”
This scarcity is a key point for investors. An investment property in, say, Perth’s outer suburbs will be more affordable. But new homes are continually being constructed, and the expanding supply can limit future capital growth.
What lies ahead for 2022?
While owner-occupier driven suburbs led the way in the past 12 months, early indicators are already signaling the return of investor activity in 2022 – a factor that is likely to result in widespread growth across the various price segments of the Perth market.
Figures from the Australian Bureau of Statistics showed lending to investors in the State jumped 87% in the 12 months to October 2021.
At the same time, the Momentum Wealth team have seen a significant rise in interstate enquiry for Perth property purchases – up 108% in the first quarter of FY22 compared to the same period the year prior.
Jennifer says this is driven by a combination of factors.
“Given rising affordability pressures in the more expensive east coast markets, many interstate buyers are looking towards alternative locations for investment – as one of the cheapest capital cities to buy, and given the continued opportunity for both growth and yield, Perth stands out as a natural choice for many of these buyers.”
Jennifer continues, “The fundamentals behind Perth’s property market are all in great shape. The WA economy grew 4.3% in 2020-21 – the strongest of all states for the second year in a row. This growth is creating job opportunities, and WA now has the second highest rate of interstate migration nationally behind Queensland – and all these people need somewhere to live.”
“All in all, this is leading to an exciting outlook for Perth in 2022”.