One size does not fit all when it comes to property markets

When it comes to real estate commentary there’s a tendency to focus on what’s happening on the east coast. Why? That’s where some of the country’s largest cities are. It’s also where a lot of the commentators are based.

You cannot expect one market to perform the same way as another. Each market is affected by different factors. The Perth and WA property markets often run counter-cyclical to the Eastern States markets due to their isolation and the impact the resources industry has on the economy.

Two examples relate to interest rates. Between 2014 and 2019, the cash rate was going down and commentators were predicting booms. East coast markets saw the predicted booms while WA experienced an extended downturn.

When interest rates started rising last year there were predictions of doom and gloom from the east coast where property prices fell sharply initially. WA proved to be much more resilient. Our lower average loans, higher average wages and relatively affordable housing meant Western Australians were in a better position to manage higher repayments.

Here are some of the factors that affect the markets.

Population. ABS Census data states Perth has a population of about 2.11 million, Sydney 5.23 million and Melbourne 4.92 million. These larger populations drive higher demand in those cities.

Number of dwellings. According to Census data there were around 880,000 dwellings in Perth in 2021. By comparison Sydney and Melbourne had around 2 million. With larger populations and more dwellings, Sydney and Melbourne will always have more listings and more sales volumes than Perth.

Population growth. When it comes to overseas population migration, the majority of migrants tend to arrive in Sydney or Melbourne initially, which also supports their demand for housing.

Mining and interstate migration. The Perth and WA property markets are more greatly affected by trends in the resources market than Sydney and Melbourne. Historically when mining capital expenditure increases, people move to WA in search of employment. Demand for housing increases and, as a result, pressure on house and rent prices increases. When mining capital expenditure decreases, as it did during our extended downturn, people leave WA seeking employment elsewhere. This contributes to a decline in demand and a decline in house and rent prices.

One size does not fit all when it comes to property market commentary. I encourage people to look to local sources like www.reiwa.com to inform their views on the WA market.

Similarly, each suburb and regional market is affected by a range of factors. If you want up to date, on the ground knowledge of what is happening in your area, speak to your local REIWA agent. No one knows the WA market better.