In this month’s update, I discuss why the Perth Property Market may not really be all doom and gloom.
In fact, Perth’s property market is abuzz with owner occupiers and investors.
Due to the low rental vacancy rate of 1.1 per cent and the low unemployment rate, the Perth market should remain strong for the foreseeable future.
As 2022 approaches its midway point, uncertainty persists as politicians and regulators face an economic future that is intimidating – at best. Further, rising inflation is looming as a threat and fast becoming the hallmark of household and business decision-making.
To combat spiralling inflation, the RBA signalled its intention to keep raising interest rates in 2022. Annual inflation reached 6.1% in the June quarter.
However, in a recent presentation, RBA Deputy Governor Michele Bullock urged borrowers not to panic. According to Ms. Bullock, savings would protect many households from short-term rate increases.
Not too stressed in the West
Western Australia has experienced unprecedented migration in recent months and remains one of the most affordable places in the country to buy a home. According to the ABS, over 13,000 people migrated west in the final months of 2021, making it the largest migration in Western Australian history.
Why? Because of lower median house prices and the strength of the property market.
According to Real Estate Institute Australia (REIA), Perth had the most affordable housing sale price of $525,750 out of all capital cities in the March 2022 quarter.
Even as interest rates rise, many investors and homebuyers seem to be looking for property in the Perth area. Well-priced inner city properties will continue to sell quickly, but we’ll see the first shift in the mortgage belt areas, typically on the outskirts of Perth.
First-time purchasers made up 38.5% of the WA owner-occupier market. This is the highest percentage of any state in the nation, according to REIA.
State of the market
Perth house prices increased by 0.4 per cent in June, marking it the second month that the rate of capital gain has decreased.
The Housing Affordability Report from REIA has indicated that WA remains the 2nd most affordable state in Australia to buy property, just behind the Northern Territory.
The slowdown comes after a brief rebound in Perth’s growth rate, which coincided with the reopening of state borders. However, it appears that the Perth market is losing steam along with the national trend.
With buying activity appearing to be high and advertised property stock remaining exceptionally low, selling conditions appear to be steady across the Perth market.
Houses typically sell in 18 days, which supports this; yet, such a quick turnaround has happened because discounting rates have risen.
Perth property predictions for August 2022
With further interest rate hikes expected after the RBA increased the cash rate by half a percentage point to 1.85%, things could get slightly worse before they get better.
The ANZ predicts an interest rate as high as 3.35 per cent by the end of 2022. Their Head of Economics, David Plank, is optimistic that this won’t mean a hard landing for the economy because of the continuing low unemployment rate and increased wages.
There you have it! Perth’s property market is sound even with more predicted interest rate hikes.
However, due to the widespread popularity of fixed-interest mortgages post-pandemic, continued rate increases pose a significant risk for the real estate industry. We will have to wait and see how this affects fixed-interest borrowers currently protected from rate increases.
The best way to navigate these uncertain times is to speak to an independent professional who understands their location.
The Haus Exchange will continue to monitor the economy’s state and provide timely updates on how it affects the Perth real estate market.
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