Perth's Property Market - 2023 and Beyond

As we enter 2023, property owners, investors and first-home buyers are keenly watching the Perth property market. Media reports from banks and economists, including REA Group Chief Economist Nerida Conisbee, generally address the situation nationwide rather than in Perth exclusively. Conclusions drawn from NSW and VIC property markets are applied nationally, making it tricky to ascertain what relates to Perth and what doesn't.

To this end, we have curated local data for more accurate insights into both a historical understanding of and future predictions for Perth's property market (based on our interpretation of the following indicators).

Vacancy Rates

Historical lows have been reported as of December 2022, which have placed unprecedented pressure on rental values. This situation may ease over the next 12 months, based on the number of new residences currently under construction.

Sales Market

Signs of underlying stability are observable; however, this differs from the constant growth observed earlier in 2022. A little more vendor discounting is required to achieve the sale, indicating a softening of the market and sellers' inflated expectations (perhaps due to historical sentiment and earlier sales data).

Interest rates and the proliferation of media releases suggesting 'doom and gloom' have impacted the current climate rather than the underlying principles of supply and demand.

Construction

The Australian Bureau of Statistics reported elevated levels of pipeline construction, with 21,800 houses and 5,800 apartments under construction as at June 2022. This may subsequently bring about a price correction - subject to labour, materials, etcetera (we can't comment conclusively on information we don't have available). The upswing in the housing market/property values has often coincided with increased construction (and likewise for declines), a trend observed within the WA property market over the last 30 years with great reliability.

Migration

Also significant is the influence of migration - according to the ABS, approximately 29,000 migrants over the last twelve months may likely have affected increased housing stock; however, the ABS data doesn't specify average household occupancy, so the actual supply and demand aren't fully quantifiable.

Jobs

Jobs creation in the resources sector has increased significantly and are also likely to increase migration levels and housing demand. With higher interest rates affecting households' disposable income, it's unlikely there will be increased employment opportunities in the retail and hospitality sectors.

Threats

A decline in new commencements for the first time in five years suggests insufficient demand. The current pipeline and the existing supply could indicate an over-supply; historically, the market tends to follow suit. Rising interest rates could be a threat, affecting borrowing capacity and ability to service current financial commitments undertaken at lower rates.

Based on the potential over-supply of stock, it's reasonable to suggest Perth's property market will correct during 2023 and beyond; whether it will flatline or slightly decline will be a case of 'watch this space' closely!

For more market insights or to find out what your property is worth in the current market, contact Jonathan Marlow on 0413 833 332, or at jm@xceedre.com.au.