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

House prices are still on track to achieve low to moderate growth in 2023, while unit prices will remain relatively stable, according to REIWA’s 2023 property market quarterly update.

Rents are also expected to rise further.

“Perth’s annual median house price has increased 1.5 per cent to $552,000 since the end of 2022,” REIWA CEO Cath Hart said.

“Resilience has been the theme for 2023 so far, with house prices continuing to grow in the face of 12 interest rate rises.

“Demand for homes is strong and is supported by population growth. This is expected to continue, with WA recording a 2.3 per cent increase in its population over the year to December 2022 and forecast to grow another 1.8 per cent in 2023-24.”

It was a different story for the unit market where the annual median price decreased 1.5 per cent from the end of last year to $399,000.

Building completions and interest rates are wildcards for the market.

“There are over 20,000 homes under construction at the moment and as they are completed we will see people move out of their current residence and into a new home, freeing up some supply in the sales and rental markets. This is already starting to be seen in the rental market,” Ms Hart said.

“However, this won’t have a significant negative impact on prices as population growth will offset the increase in supply. In addition, these homes will not all be completed at the same time, so the market will not be flooded by more properties to sell or rent.”

While the market has shown resilience to interest rate changes, Ms Hart said they had still had some impact.

“We have certainly seen a decrease in sales activity in the sub-$500,000 price bracket. This is the segment of the market where buyers’ and homeowners’ budgets are more sensitive to the increase in interest rates and cost of living,” she said. 

“Buyers have become more budget conscious and this will increase if additional rate rises reduce their borrowing power further.

“And while sales activity has decreased at the lower end of the market, it is the cheaper suburbs that are recording the quickest selling times, suggesting affordability is important to buyers who are acting quickly when they spot an opportunity offering good value.”

Perth sales market

Properties continued to sell quickly in the second quarter of the year, with June setting a new record median of 10 days on market.

The number of properties for sale on www.reiwa.com hit a 13-year low of 5,384 at the end of June.

“For a couple of months, the number of sales exceeded the number of properties coming to the market, which has seen listings on www.reiwa.com decline,” Ms Hart said.

“This started to change towards the end of June with new listings increasing slightly and sales falling below new listings.

“We expect more properties to come to the market as we move into Spring. However, it will be some time before we return to a traditional balanced market.”

Perth rental market

Ms Hart said the market would remain challenging for tenants.

“The median house price hit a record $580 per week at the end of June, up from $550 in December 2022,” she said.

“The median unit price also set a new record. It rose from $475 at the end of last year to $525 in June.

“The vacancy rate has been 0.7 per cent since the beginning of the year and property managers are still seeing queues at home opens and receiving multiple applications.

“Demand will maintain pressure on prices and we will see median rents increase over the remainder of the year as 12-month fixed-term leases come up for renewal at current prices.”

Ms Hart said there was some good news for tenants, with early signs the rental market was easing.

“Rental listings have been over 2,000 since the first week in June. And while the number of listings at the end of June was still about 6 per cent lower than in June 2022, it was a big improvement on the past few months when it was about 20 per cent lower year-on-year,” she said.

“Building completions are playing a role in the increasing listings. Our members are reporting more tenants moving out into their long-awaited new homes and this is freeing up some supply.

“We are also seeing an increase in requests for additional occupants as tenants seek to split the rising rent costs as well as address the difficulty of finding a property in current tight conditions. This is also easing some of the pressure on the market.

“Our members are reporting strong interest from Eastern States investors who see value in Perth prices and strong rental yields. This is slowly adding to supply as well.

“If current trends continue, we expect to see a slight easing in the vacancy rate in the coming months.”

Regional WA

Market conditions across regional WA are expected to remain strong through the remainder of 2023.

“The majority of the regional centres saw median price growth in the first half of 2023 although, like Perth, the rate of growth has been slowing,” Ms Hart said.

“Our members report well-presented homes priced to meet the market are selling quickly and attracting multiple offers.

“Population growth is supporting regional property markets and the challenges of building in regional areas are seeing more people turning to the established market.”

Vacancy rates remained low in regional centres and the lack of supply coupled with strong demands was seeing rent prices rise in the six months to June.