While most observers obsess over house price movements in Sydney, Melbourne, and Brisbane, another city has quietly emerged as Australia's fastest-growing real estate market.
Over the last 12 months, growth in Perth has overtaken Sydney, Brisbane, and Melbourne.
And the trend is almost certain to continue. Growth rates in Perth have been nothing short of astonishing.
Houses led the charge at 13.7%, combining with units at 11.8% to see overall prices in the Western Australian capital surge by 13.2% in 2023.
Even more remarkable is that this occurred simultaneously with a significant increase in interest rates.
REIWA Chief Executive Officer Cath Hart said not even the interest rate rises of last year had slowed Western Australia’s property market.
“After a slow start, house sale price growth accelerated over the year, recording 2.6 per cent growth in the December quarter and 8.3 per cent over the year to reach a median of $590,000.”
The question every investor has, though, is…will Perth continue to perform?
There is every indication that this wasn’t a one-off result and that Perth will continue to outperform the national market in the future.
Strong demand as the population surges
One of the reasons for Perth’s strong result is the incredibly strong population growth.
According to the ABS, Western Australia’s (WA) population grew by 3.1% from 2023 to 2024, making it the fastest-growing state in the country.
This is no surprise either because Perth is becoming extremely popular.
In the 12 months to March 2023, the economy of Western Australia grew more rapidly than any other state.
This is largely off the back of strong export demand for minerals as demand from China has bounced back strongly. And while mines are in remote areas, many miners have head offices in the city.
Unemployment is also lower than the national average, at 3.4% compared to the national average of 3.6%.
And it shows with high salaries. Online job search company talent.com has found Perth workers enjoy the highest salaries of any capital city in the country.
Of course, the higher the population, the more demand there is for houses. This increase in population created a demand for an additional 35,000 houses.
Severely constrained supply issues are looming
Normally in a balanced market, any increase in demand should be matched with an increase in additional housing.
Except in Perth, the opposite is happening.
Housing approvals are actually falling in Perth, with approvals for private sector houses dropping 2.8% in the latest numbers from November 2023.
This severe lack of new houses will continue to put additional pressure on house prices, with cashed-up buyers offering more and more for the limited stock on the market.
And the shortage of housing in Perth is more severe than many people realise.
Listings for Perth real estate were almost 45% below the 5-year average toward the end of October 2023. And at the same time, sales activity is nearly 25% above average.
In other words, more people are fighting over fewer houses which is a recipe for the rapid house price growth we’ve seen.
It’s also seen some of the fastest rental increases in Australia, with suburbs in Western Australia recording some of the biggest price rises in the country.
The pricey suburb of Swanbourne near the CBD recorded the highest yearly change in rental prices, up an astonishing 42.5% in December 2023.
All this is no surprise for many analysts, though.
Westpac is tipping Perth prices to continue growing by 10% in 2024.
ANZ is predicting a further 8% increase while Proptrack is predicting a rise of 5%–8%, with SQM predicting a similar result.
Higher investor demand
As a result of the strong outlook for Perth, interest from buyers on the East Coast has continued to grow.
Nathan Hewitt, Director of Yard Property, says the opportunity for capital growth is high in Perth.
He has seen many East Coast investors buying into the market, though suburbs like North Fremantle are relatively undiscovered, albeit popular with locals.
What does all this mean for Perth?
There’s no doubt that all eyes will be on Perth this year. This is especially true since in Perth, the house prices are more affordable than in Sydney, Melbourne, and Brisbane.
A combination of extremely high demand, high salaries, and low building supply will leave Perth poised to continue its strong run well into 2024 and beyond.
And we’re likely to see the gap between the Western Australian capital and the East Coast capitals continue to close.