A strong local economy, overseas and interstate migration and continued tightening in supply levels are expected to make Perth an attractive market for property investors in 2024.

 

Perth’s housing market is set to soar in 2024 with forecasted value gains of up to 10% over the next 12 months – marking it as an attractive destination for local and interstate investors.

Three key factors are driving the growth of Perth’s property market.

A robust WA economy

The WA economy achieved a total output of Gross State Product (GSP) of $445.3bn in 2022-23, equal to almost one-fifth (17.4%) of Australia’s Gross Domestic Product (GDP). These strong GSP results were largely driven by WA’s mining industry which contributed $200 billion alone.

The health of the economy has also been reflected in the state’s highest ever level of full-time employment – something which is having key flow-on effects for Perth’s housing market.

Unemployment remains low at 3.8% and is expected to remain low in 2024. With more people employed, there is generally an increase in disposable income within the economy which can lead to higher demand for housing, as more people can afford to buy homes. This demand can drive up property prices, especially in areas with limited housing supply.

Over the past four years to March 2023, the demand for dwellings in WA has increased by over 80,000, but when you consider building completions less demolitions, we have only been able to add around 48,500 dwellings to the market.

Significant population growth

Data from the Australian Bureau of Statistics confirms that WA’s robust economy is attracting new residents at a record pace.

In the year to March 2023 (the most recent ABS figures available), WA’s population grew by 2.8%, the highest across Australia, fuelled by both interstate and international migration.

As we look towards 2024, WA’s job prospects are set to continue attracting workers to WA, and these new residents will need somewhere to live which will drive further demand.

REIWA reports that on 3 December 2023, just 4,755 properties were listed for sale, significantly below the 13,500 listings regarded as the benchmark for a ‘balanced’ market.

Demand outstripping supply

While demand remains high, dwelling approvals and completions have held at record lows throughout 2023 due to challenges in the construction sector.

These factors combined are providing a further impetus for future price growth.

With the increase in population and smaller household sizes due to covid, over the past four years to March 2023, the demand for dwellings in WA has increased by over 80,000, but when you consider building completions less demolitions, we have only been able to add around 48,500 dwellings to the market.

This is creating a supply shortage that will continue to place upward pressure on house prices for some time to come. While we may see an increase in household sizes due to the increased prices, we are a long way from being back to balance between supply and demand.

REIWA reports that on 3 December 2023, just 4,755 properties were listed for sale, significantly below the 13,500 listings regarded as the benchmark for a ‘balanced’ market.

According to REIA’s latest Housing Affordability Report, only 35% of a family’s income goes towards home loan payments in WA compared to 56% in NSW, 46.5% in Victoria and 42.4% in Queensland.

Affordability is a key drawcard

Despite the intense demand for Perth homes, the WA capital continues to offer one of Australia’s most affordable housing markets.

The median dwelling value in Perth is currently $646,520, second only to Darwin ($496,792), and almost half the median price of Sydney ($1.125m).

Perth’s affordability is reflected in the proportion of income required to fund a home.

According to REIA’s latest Housing Affordability Report, only 35% of a family’s income goes towards home loan payments in WA compared to 56% in NSW, 46.5% in Victoria and 42.4% in Queensland.

This relative affordability is particularly attractive in the current interest rate environment and is driving interest from interstate investors as well as locally.

We expect to see rents climb higher and vacancy rates remain near record lows as a growing population of tenants compete for limited dwellings.

Rental growth driving yields upwards

Combined with recent rental growth, these affordability levels are seeing Perth offer some of the strongest rental yields in Australia, with yields of 4.6% in November according to CoreLogic – second only to Darwin.

Housing rents in Perth soared 19.8% over the 12 months to the September 2023 quarter, according to REIWA figures.

We expect to see rents climb higher and vacancy rates remain near record lows as a growing population of tenants compete for limited dwellings.

The upside is that we are seeing more investors across Australia buying into the Perth market which over time will help to build the city’s pool of rental stock.

Interstate buyers urged to do their due diligence 

With an increasing number of interstate buyers looking to gain exposure to the Perth market investors should remain cautious in their property selection.

In 2023, we saw a lot of interstate investors buying properties sight unseen, with many overpaying due to lack of familiarity with the local market or purchasing in areas we wouldn’t necessarily consider investment-grade.

As we head into 2024, the Perth property story is only just starting to warm up, and I am confident Perth is set for exceptional property gains in the new year.

However, not all suburbs and properties will grow at the same rate. As always due diligence and informed property selection remain critical.

Image: Rockingham a Perth suburb located 47 kilometres south west of the CBD where it’s understood up to 50% of recent sales have been to interstate buyers