House prices and rents to grow further in 2023 - REIWA market forecast update

WA’s house prices will achieve moderate price growth over 2023, with the median potentially reaching $580,000 by the end of the year, according to REIWA’s 2023 property market quarterly update.

Rents are also expected to rise further.

“After 0.9 per cent growth in the first quarter of the year, the median house price rose nearly 2 per cent in the June and September quarters to reach $570,000, showing total growth of 4.6 per cent since the end of 2022,” REIWA CEO Cath Hart said.

“Resilience was the theme earlier this year, but records is the key word now.

“In the last quarter we’ve seen new records for house prices, the median time to sell and a new record low in the number of listings advertised for sale.

“Earlier this year I said the big drivers of the WA market over 2023 would be the three As – Availability, Appetite and Affordability.

“With WA’s population growing 2.8 per cent in the year to March, the most growth in the country, the appetite for WA property is strong and likely to remain this way for some time. 

“Availability of stock meanwhile remains low. While the number of homes coming to the market is about 6.3 per cent lower than the same time last year, the number of sales is 16.4 per cent higher, reflecting the strong demand.

“Houses are selling like hotcakes and the number advertised on www.reiwa.com hit a 30-year low of 4,931 at the end of September, well below the 12,000 that is considered a balanced market.”

“When it comes to affordability, even though prices are rising, WA remains one of the most affordable places to buy in the country. Our house prices, higher than average incomes and lower than average mortgages mean it is easier for people to buy and service a mortgage here, despite the significant rise in interest rates since May last year.

“The property market is underpinned by strong fundamentals – our economy is currently the strongest in the nation, we have low unemployment and record population growth. This supports further price growth.”

The unit market did not perform as well as the house market, despite strong demand for dwellings. The median price has decreased 1.2 per cent from the end of last year to $400,000 at the end of September.

Perth rental market

New records were also set in the rental market in the third quarter of the year.

The median house rent hit a new record high of $600 per week at the end of August, up from $550 in December 2022.

The median unit rent price also set a new record, rising from $475 at the end of last year to $550 in August.

Ms Hart said the rental market would remain challenging for tenants.

“The vacancy rate remains at an extreme low,” she said.

“It was 0.7 per cent for the first half of the year, and while it rose to 0.9 per cent in July, offering some hope of change, it dropped back to 0.7 per cent in September.

“Property managers are still seeing queues at home opens and receiving multiple applications. Homes are leasing in a median of two weeks. Essentially one tenant moves out and another moves straight in.

“Demand is high and supply is low. This is unlikely to change in the future, maintaining upward pressure on prices. We expect to see median rents increase over the remainder of the year. 

“There are promising signs for the future with the Government announcing a range of initiatives to boost housing supply over the longer term and builders reporting very strong interest from Eastern States investors. However it will be some time before new homes can be brought to the market and a change felt.”

Regional WA

House prices in most regional centres have shown a similar growth rate to Perth over 2023.

Rent prices have also shown strong growth, with some regional centres at record highs.

While the South-West recorded strong growth during the pandemic, lately the focus has been on the North-West, with Karratha and Port Hedland among the top performers for house price growth and rent price growth.

“Lifestyle was a key driver for the southern regions, particularly during the early stages of COVID,” Ms Hart said.

“However, employment is a factor now. There are a lot of regions investing in infrastructure or with organisations looking to expand. There is demand for employees and they need to be housed.

“This difficulty in finding housing though is hampering expansion and is seeing some businesses look to different solutions, such as buying motels to house their staff or buying homes to rent to staff.”

Ms Hart said regional centres were facing the same issues as Perth and this was putting upward pressure on house and rent prices.

“Population growth isn’t limited to Perth, the regions are also seeing their populations increase,” she said.

“Regional buyers and tenants are facing the same constraints as those in Perth. And while building in Perth still has some challenges, it is harder in the regions and this is continuing to focus demand on established homes.”

Vacancy rates remained low in regional centres in the September quarter.