House prices to grow 10 per cent in 2024: REIWA market forecast update

Perth house prices are set to grow 10 per cent in 2024, according to REIWA’s 2024 property market quarterly update.

Rents are also expected to rise, although the rate of growth may slow.

“The raft of interest rates rises in 2023 did not slow the WA property market,” REIWA CEO Cath Hart said.

“After a slow start, house sale price growth accelerated over the year, recording 2.6 per cent growth in the December quarter and 8.3 per cent over the year to reach a median of $590,000.

“This is a new record for Perth house prices. While it is 24.2 per cent higher than the low of $475,000 recorded in 2020, it is only $45,000 or 8.3 percent higher than the previous peak of $545,000 reached in 2014.”

The median unit sale price was stagnant for many months across 2023 but started to increase at the end of the year, rising 2.0 per cent over the December quarter and 0.7 per cent over the year to a median of $408,000.

“We can expect more increases in the median unit price in 2024,” Ms Hart said.

“With houses in limited supply and prices rising, more people, particularly those seeking to escape the challenges of the rental market, are looking to units as an affordable way to enter the market.

“And while it has risen, the median unit price is still 9.3 per cent below the record of $450,000 set in 2014.”

2023 saw the market set records for the median house price, the median time to sell (eight days), and new lows for the number of properties for sale (3,648 at the end of December).

Ms Hart said the key drivers for the market in 2024 would be population growth, building completions and the WA economy.

“Population growth is a significant factor behind housing demand,” she said.

“WA recorded a 3.1 per cent increase in its population in the year to June, the strongest growth rate in the country, according to the Australian Bureau of Statistics.

“That saw our population grow by nearly 87,000 people, with immigration and natural increases. That’s about 35,000 additional households in 12 months, if you assume there are 2.5 people per household.

“However, in the same timeframe about 14,000 new homes were completed. That’s a shortfall of over 20,000 dwellings, which is putting incredible pressure on the established homes market and driving up prices.

“More population growth is expected over the next year, with the State Government revising its forecast population growth of 1.7 per cent for 2023-24 to 2.4 per cent in its mid-year budget review.

“However, the Housing Industry Forecasting Group expects about 15,000 to 16,000 new dwellings to be completed in the year to June 2024.

“Based on these figures we can expect demand for established homes to be high for some time to come.”

Ms Hart said a strong economy drove population growth in part, with people moving to WA for employment opportunities, while low unemployment meant people were more likely to be able to afford to buy a home and adapt to changes in interest rates.

“The latest figures published in the mid-year budget review suggest the economy will remain strong, with the State Final Demand revised up from 3 per cent at Budget time to 4.5 per cent. This builds on growth of 3.8 per cent in 2022-23,” she said.

“Labour market conditions also remain strong, with employment growth more than double the Budget forecast and the average unemployment rate over 2023-24 revised down to 3.75 per cent from 4 per cent.

“Mining, which is a significant contributor to the WA economy, is also performing well.”

Inflation appears to be slowing and should the RBA lift rates in 2024, Ms Hart said further increases were unlikely to derail the market.

Perth rental market

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

The median dwelling rent hit a new high of $600 per week at the end of December, up 3.4 per cent from $580 at the end of September and 15.4 percent from $520 at the end of December 2022.

The median weekly house rent price also set a new record, rising 3.3 per cent over the quarter and 12.7 per cent over the year to $620.

What they lacked in sale price growth, units made up for in rent price growth. The median unit rent price rose 3.6 per cent from the end of September and 20 per cent from the end of 2022 to $570 per week at the end of the year – a record high.

Rental listings remained low, hovering around 2,000 for most of the year, before dropping to 1,518 in December. While low, this was still 5 per cent higher than at the end of 2022.

The vacancy rate was 0.7 per cent the majority of the year, rising briefly to 0.8 and 0.9 per cent in June and July respectively.

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

“Strong demand underpinned by population growth and limited supply continue to put upward pressure on prices,” she said.

“The pressure on the rental market will only be eased by:

• an increase in supply, which is unlikely. The building industry has completed an average of 14,000 new homes in the past three financial years and this is not forecast to rise dramatically in the coming year. While the State Government is implementing a series of measures to boost supply, it will take time to get more houses out of the ground.
• a drop in demand. This is also unlikely based on current indicators. The economy is strong, our housing is relatively affordable, and people are moving to WA in large numbers.

“We may see some minor self-adjustment of demand as tenants respond to low supply and rising prices. For example, demand may fall slightly if tenant household sizes rise, more people elect to buy - although this has challenges of its own - or people simply choose to stay in the family home longer or move back in with their parents to avoid the rental market.”

Regional WA

House sale price growth in the regions varied in 2023, with some stellar performers and others achieving more modest growth.

Rent prices also showed strong growth, with most regional centres at record highs.

“We can expect more of the same in 2024,” Ms Hart said.

“The rate of house price growth is likely to slow in those regional centres that saw strong growth during the pandemic, such as Busselton and Albany.

“Bunbury was one of the standout performers in 2023 and is likely to continue to perform well. Housing is affordable, it has the benefit of being close to both Perth and the attractions of the South West, and offers the benefits of a South-West lifestyle.

“The nearby Busselton airport, which flies out to several major mine sites, also allows people to live in the region and fly out to work.

“As a large regional centre Bunbury also offers a lot of employment opportunities, and these are set to grow with plenty of development in the area.

“Port Hedland is also looking to perform well in the coming year.”

WA’s shortage of properties and strong demand would see rents continue to increase in the regions.

“There is a lot of development in many of the regions which is attracting people to those areas,” Ms Hart said.

“They need to be housed but rental properties are in short supply. Increasing supply in the regions is a huge challenge and this will maintain upward pressure on prices.

“As the resource sector continues to expand, the northern regional centres have the potential for the strongest rent price growth in 2024.”