20 per cent price growth a very real possibility: REIWA market forecast update

A 20 per cent increase in Perth’s median house sale price from January until the end of the year is a very real possibility, according to REIWA’s 2024 property market quarterly update.

REIWA CEO Cath Hart said the rate of house sale price growth has accelerated in the last two quarters.

“Updated figures for December show 4.3 per cent growth over the quarter and preliminary figures for March are sitting at 4.2 per cent. We can expect that to increase as more properties settle,” she said.

“The median house sale price has increased 13.6 per cent over the 12 months to March, to a record $625,000, and if the market continues to grow as it has been, 20 per cent growth is achievable between January and the end of 2024.”

Ms Hart said current market conditions were underpinning the expectation of ongoing price growth.

“As well as price trends, we look at a range of figures when preparing our forecasts and the data suggests the significant imbalance between supply and demand will remain in 2024, maintaining the upward pressure on prices,” she said.

“We have very high demand, fuelled by extremely strong population growth and this is expected to continue - we are awaiting the Cook Government’s latest population forecast in the upcoming May State budget.

“In addition, supply of new housing remains limited, which continues to focus demand on established homes. Building completions have been increasing, which is fantastic news, but we are still not building enough new homes to meet the demand from WA’s growing population.

“Detached houses make up the majority of the new building activity with apartment construction limited to luxury projects, which is limiting the provision of affordable and diverse housing options.

“While completions are up, new home commencements have been declining. New home approvals have only just started to trend upwards. These figures suggest new home supply will remain below the State’s needs for some time.”

Ms Hart said the strength of the WA economy was also supporting price growth.

“Unemployment is low, which boosts consumer confidence as well as people’s ability to buy a home and manage a mortgage,” she said.

“The Reserve Bank’s new meeting schedule is also giving people a break from monthly concerns over rate rises and some commentators are forecasting a rate cut in the medium term which would also support buying power in WA.”

Ms Hart said there would need to be a significant change to the current conditions to slow Perth dwelling price growth.

“We will continue to watch the data and update our forecast accordingly,” she said.

The median unit sale price also improved strongly over the March 2024 quarter, recording 3.4 per cent growth to reach $425,000. This was 6.3 per cent higher than March 2023.

By comparison, units recorded 2.8 per cent growth during the December quarter and 1.5 per cent over 2023.

The median unit sale price remains below the record of $450,000 set in 2014.

“We have seen demand for units increase in the past few months,” Ms Hart said.

“While many people prefer houses, they are selling quickly and prices are rising strongly, which is challenging for buyers. In general, units provide a more affordable entry point to the market for prospective buyers.

“With demand for established homes remaining strong, we can expect unit prices to continue to increase in 2024, potentially exceeding the previous peak.”

Perth rental market

Records continued to be set in the rental market in the first quarter of the year.

The median dwelling rent hit a new high of $650 per week at the end of March, up 8.3 per cent from $600 at the end of December and 18.2 per cent from the $550 recorded at the end of March 2023.

The median weekly house rent price also set a new record, rising 4.8 per cent over the quarter and 18.2 per cent over the year to $650.

The median unit rent price rose 5.3 per cent from the end of December and 20.0 per cent from the end of 2023 to $600 per week – another record.

Rental listings remained low, sitting below 2,000 over the quarter.

The vacancy rate dropped to a new record low of 0.4 per cent at the end of March.

“The rental market is affected by the same conditions as the sales market: strong population growth and low supply which maintain upward pressure on rents,” she said.

Ms Hart said there were signs demand was moderating in some sectors of the market.

“Some agents are reporting a slowdown in demand at the higher end of the market however, it remains strong in the more affordable price brackets.

“We are also seeing some self-moderation of demand. This includes an increase in tenant household sizes, tenants electing to buy where possible and people simply choosing to stay in the family home longer or moving back in with family to avoid the rental market.

“In what we hope becomes an ongoing trend, supply is getting a boost with some newly built homes owned by Eastern States investors finally coming to the rental market. This is predominantly in outer-lying suburbs where there has been land to develop.

“And a large refurbishment project in Maylands was completed in March, adding over 100 apartments to the market.”

Regional WA

“House prices in the regions are also seeing the effects of WA’s strong population growth and this will continue as our population continues to grow and home building remains constrained, Ms Hart said.

“Lifestyle remains a strong drawcard for the regions and the South West is also benefiting from the changing nature of mining work, with the Busselton airport allowing more workers and their families to live in the region and fly-in-fly-out.

“The regions are still experiencing severe rental stock shortages and, as with the Perth market, until we see a significant fall in demand or increase in supply, we can expect regional rents to continue to rise.”

REIWA will be publishing its regional March 2024 quarter report in May.