Property market update: Perth, January 2022

The Western Australian capital bucked its traditional January slow start by recording its highest monthly increase since May 2021, driven by a low supply that was unable to match the unprecedented demand for the city’s housing market. 

Commenting on the recent market data, Real Estate Institute of Western Australia (REIWA) president Damian Collins said this was a strong start to the year, especially given activity is typically lower in January following the festive season.

“Demand has been strong in the first month of the year. If this continues, the Perth market is on track to achieve the 10 per cent price growth that REIWA forecast for 2022,” Mr Collins said.

Last month, REIWA predicted house prices would jump 10 per cent this year as the state finally opened up its borders to interstate and overseas migrants in early February. 

However, Western Australia’s border opening was set back by almost a month from the original date after the state government cited fears of low booster vaccination rates.

According to local experts, the strong monthly gain is underpinned by a supply shortage in the city, as developments are on hold due to borders still being closed off, barring skilled workers from entering the Western Australian capital’s labour market. 

A new report from the Property Council of Australia revealed that more than a third of Perth’s approved pipeline of apartment developments – and a further $2.2 billion of apartment projects yet to achieve development approval – are on hold due to skills shortages. 

Eliza Owen, the head of residential research Australia at CoreLogic, said the hit to supply could further boost dwelling prices following last year’s 13.1 per cent gain.

Speaking on the city’s current growth trend, Ms Owen noted that Perth still has room to grow. “Perth is still recovering from the post-2014 mining downturn, with dwelling prices up the same 13.1 per cent over 10 years and units still 14.4 per cent below their 2013 peak,” she said.

With the state tentatively slated to reopen its borders to international and interstate travellers on 3 March, experts forecast a snapback in Perth’s market activity. 

Before we look deeper into what’s in the cards for Perth in the coming months, let’s see how the city’s property market performed in January 2022. 

Property values

Perth’s real estate market has defied tradition after home values increased in January by the biggest monthly amount in more than half a year. 

Property values in the city rose 0.6 per cent in January – the city’s biggest increase in dwelling values since May 2021, according to CoreLogic. 

January’s bump in dwelling prices was a modest lift from December’s result when dwelling values grew at a rate of 0.4 per cent. 

Over the year, property values in the city rose by 11.2 per cent, bringing the median values in the city to $531,243 from $528,551. Over the month, median values rose by over $2,600. 

Perth’s median house value is the second-lowest in the country, behind Darwin with a median value of $496,476. 

Median values for houses in Perth rose 0.7 per cent over the month, up from the 0.4 per cent increase recorded in December. 

Compared to the same period last year, Perth house prices have risen by 11.4 per cent, with the average house in the city now selling for $555,000. 

A typical Perth house is now about $65,000 more expensive than it was at the beginning of 2021. 

Meanwhile, units saw no price movement during the same period, a repeat of the sector’s performance in December. 

Compared to January 2021, Perth’s unit prices are now up 9.6 per cent, with the city’s units now selling for an average of around $400,000. Over the year, Perth’s units have experienced a gain of $35,000.

Data from REIWA showed Perth’s median house sale price was $521,000 in January, with almost 50 suburbs notching up price growth during the month. 

Erskine was the top-performing suburb in January, with its median house sale price growing 4.4 per cent during the month to $450,000.

This was followed by Padbury (up 2.4 per cent), Kalamunda (up 2.1 per cent), Harrisdale (up 2 per cent) and Wembley (up 1.7 per cent). Completing the top 10 were Kinross, Falcon, Spearwood, Canning Vale and Landsdale.

“Interestingly, seven of the 10 top-growth suburbs featured median house sale prices between $520,000 and $800,000, which is considered to be part of the upper middle of the market,” Mr Collins noted. 

Supply and demand

Despite the city’s property market feeling the pinch from supply issues, the appetite for Perth properties remained high during the month, evidenced by low average selling times and strong sales activity. 

According to SQM Research, total residential listings in the city fell by 4 per cent over the month to 21,004 from 21,877 in December. 

Compared to the same period last year, the number of properties that are listed on the market is down by 2.3 per cent – the biggest annual decline in stocks among capital city markets. 

Perth’s new listings (or properties that have been on the market less than 30 days) saw a 10.3 per cent drop over the month from 5,733 to 5,143. On the one hand, new listings in the city are up by 18.2 per cent on an annual basis. 

Meanwhile, data showed that old listings or property listings over 180 days fell by 3.2 per cent from 3,838 in December to 3,717 in January. On an annual basis, old listings have fallen by 38.1 per cent. 

REIWA reported that a total of 8,245 properties were for sale at the end of January, which is 3 per cent higher than December 2021. 

Mr Collins said the slight jump in the stocks was due to vendors returning to the market after the holiday break. “We’ve seen a slight increase in the number of properties for sale in Perth during January, as sellers who deferred their listings over the break come back to market ready to take advantage of Perth’s strong buyer appetite,” he said. 

Despite the Christmas and New Year festive period typically resulting in reduced sales across Perth, there were several suburbs that saw a high number of sale contracts being exchanged. 

REIWA reported that Morley recorded the biggest growth, with sales activity increasing 43 per cent during the month.

This was followed by Southern River (sales up 38 per cent), Craigie (sales up 38 per cent), Spearwood (sales up 23 per cent), East Victoria Park (sales up 18 per cent), Wembley (sales up 14 per cent), Halls Head (sales up 7 per cent) and Canning Vale (sales up 3 per cent).

The median time to sell a house during January was 15 days, which is one day slower than December 2021 and six days faster than January 2021.

“Median selling times are still exceptionally low and have been for some time now. We’d normally expect this figure to be up around 30 to 40 days, so the fact it continues to hover around the two-week mark is a testament to how tight competition for properties is in Perth,” Mr Collins said.

The fastest-selling suburbs in January were Harrisdale (seven days), Tapping (seven days), Leeming (eight days), Cooloongup (nine days) and Craigie (nine days).

Other suburbs to record fast median selling times were Hillarys, Kinross, Padbury, Warnbro and Greenfields, according to REIWA. 

Auction markets

CoreLogic reported that out of the auctions held across capital cities during the two last weeks of January, only 28 occurred in Perth, with an average clearance rate of 60 per cent. 

According to REIWA, auctions represent only 2 per cent of property sales in Perth compared to 30 per cent on the east coast, where the process is lauded for its ability to achieve strong prices for home owners.

For more updates, expert industry insights and stories about Australia’s auction markets, follow our weekly updates in our News section. 

Rental market

Perth’s rental market continued to tighten in January despite rental listings seeing a seasonal start-of-the-year boost in volumes. 

Perth’s median rent price stood at $450 per week at the end of the month, indicating a $5 dollars increase from December.

Despite the increase, Western Australia is still the most affordable capital city for tenants across the country, with the proportion of family income in Western Australia required to meet the median rent is sitting at 17 per cent, according to REIWA. 

Speaking on the monthly data, Mr Collins said: “Even though rents have increased over the last 12 months, we are not seeing unsustainable growth rates month-on-month. Western Australia is still the most affordable place to rent in the country.”

The suburbs to record the biggest increase in median rent during January were Dianella (up $20 to $450 per week), Yanchep (up $18 to $438 per week), Ellenbrook (up $10 to $410 per week), Byford (up $10 to $440 per week) and Success (up $10 to $480 per week).

Other suburbs to record strong rental gains were Cloverdale, Armadale, Thornlie, Nedlands and Wellard.

In terms of supply, REIWA reported there were 2,345 properties for rent at the end of January, indicating a 25 per cent increase over the month.

“We saw rental listings reduce significantly at the end of December, which is not unusual for that time of year. Pleasingly, this reduction was temporary and listings for rent are now 9 per cent higher than they were three months ago,” Mr Collins said.

The local expert acknowledged that the city is “still a long way” from fixing the rental shortage in the market. “We need WA’s borders to open to increase investment in the state and attract people with trade skills here to help complete construction and free up rental stock,” he stated. 

REIWA also reported that it took a median of 16 days to lease a rental during January, which was the same as December and two days faster than January 2021.

The suburbs that recorded the fastest median leasing times during January were Wellard (12 days), Willetton (12 days), Nedlands (13 days), Warnbro (13 days) and Yanchep (13 days).

Other suburbs to experience fast median leasing times were Alkimos, Byford, Subiaco, Success and Scarborough.

Looking forward, rents in the city are expected to increase due to supply and demand factors, which, in turn, will encourage investors back into the market to increase stock levels.

Domain chief of research and economics Nicola Powell said the biggest concern for tenants looking to rent in the city was how quickly rentals had surged.

“If we continue to see house rents grow at the same quarterly rate of growth, it could mean that they surpass that mid-2013 rental price peak by the end of this calendar year,” Powell said.

REIWA expects rent prices to increase between 10 and 15 per cent during 2022.

“Tenant demand will remain high in 2022, which will see rents continue to rise,” Mr Collins stated. However, he does not expect Perth rents to surpass cities on the east coast on the affordability scale.

Vacancy rates 

Perth was the only capital city that did not see the rental vacancy rate tighten over January as Western Australia’s borders remained firmly closed to the rest of the nation and overseas kept out potential tenants from filling up empty rental listings. 

According to Domain, the city’s vacancy rate was unchanged at 0.6 per cent over the month — a level that is historically lower compared to previous years. 

Data showed that several regions across Perth saw the largest rise in vacancy rates, with Cottesloe – Claremont recording the biggest monthly difference of 0.4 percentage points, up to 1.1 per cent. 

During the month, the areas with the highest vacancy rates were Cottesloe – Claremont (1.1 per cent), Perth City (1 per cent), Canning (0.7 per cent), Joondalup (0.7 per cent), and Fremantle (0.6 per cent). 

Meanwhile, the areas with the lowest vacancy rates were Kalamunda (0.2 per cent), Rockingham (0.3 per cent), Kwinana (0.3 per cent), Gosnells (0.3 per cent), and Cockburn (0.3 per cent). 

Outlook for Perth’s property market 

With a strong start to the year, most experts see Perth following an upward growth trajectory in the coming months. 

“If the January figures are anything to go by, the Perth market shows no signs of slowing down in 2022,” Mr Collins said. 

Despite the temporary setback in Perth’s anticipated restart, Mr Collins also reiterated his belief that Western Australia’s border reopening will set the stage for another year of solid growth in house prices in 2022.

Meanwhile, Daniel McQuillan, managing director of Nu Wealth, also predicts that “Perth house prices are set for a major national rebalancing”, similar to what happened in the market 20 years ago. 

He explained that based on historical trends, Perth house prices are now massively undervalued compared to the national average for Australian capital cities. 

“Overall, Perth house prices are set for a major national rebalancing as occurred 20 years ago, beginning in 2002,” he said.

He cited the latest national figures produced by the Real Estate Institute of Australia (REIA), which revealed that the median house price in Perth at $520,000 was the lowest median capital city house price across Australia and 45.9 per cent lower than the national average.

“This is a historic anomaly that will be reversed beginning in 2022 based on the strong economic fundamentals in Western Australia over the coming years,” he explained.  

Mr McQuillan said Western Australia’s strong economy would be the key factor that will help the rebalancing take effect over the next 12 months after experiencing a slightly slower growth than other states the past year.

“Nu Wealth believes that the current national imbalance in Perth house prices is unsustainable and during 2022, the median house price in Perth will start to gain traction as investors appreciate the city is undervalued. This upward climb in Perth house prices should last several years,” Mr McQuillan opined.

He also advised investors to get into the market before it becomes too hot. “2022 is shaping up to be a breakout year for the Perth property market and investors should act now and get in early before prices start to rise rapidly, especially in undervalued suburbs of Perth,” he said. 

In Domain’s latest House Price Report, Dr Powell also expects the Perth market to gather more momentum as borders reopen. 

Looking back on the last quarter of 2021, she stated: “Perth has been benefiting from a positive net flow of residents into the city, although easing slightly from the highest point in eight years. This has been a huge change for the city that had seen a drain of residents away. 

“Sale volumes are sitting close to record numbers and demand remains strong but looks to be easing.” 

Dr Powell added Western Australian property’s second wind could come as buyers look to find a new home in a new state or return to be closer to family and friends.

“Once borders reopen, this could provide another wave of new demand, freely allowing an easier relocation from overseas and interstate.”

Meanwhile, AMP Capital economist Shane Oliver said that while a delayed coronavirus wave was expected to hit Western Australia, it would not have a big impact on the property market.

He said Western Australia would benefit from people relocating to the state again once borders open, including those looking for more affordable property.

“That has already benefited cities like Brisbane and Adelaide where prices have risen substantially,” Dr Oliver said.

“The experience in Australia’s property market is that any interruption from coronavirus tends to be short-lived.” 

For more of the latest news on Perth’s property market, you can read our related articles such as 10 Perth suburbs poised for price growth in 2022, Where property prices are predicted to see the greatest growth in 2022, and Is Perth building back better, stronger after years of market downturn?

If you’re a first-time buyer looking to enter the real estate market, make sure to also check out Smart Property Investment’s brand-new white paper, Why 2022 is the right year to invest for beginners.  

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