Understanding the cyclical nature of real estate markets is crucial for investors seeking to navigate and capitalise on market dynamics effectively. Perth, like many other property markets, experiences these cyclical patterns, influenced by various factors such as interest rates, employment rates, population growth, and economic conditions.
Exploring the current state of Perth’s property market, its drivers of growth, and the relevance of the 7-year property cycle, provides valuable insights for property investors aiming to make informed decisions.
The 7-Year Perth Property Cycle
The concept of a 7-year property cycle provides a useful framework for understanding market dynamics. It suggests that real estate markets undergo phases of growth, peak, downturn, and recovery approximately every seven years. While this theory helps to identify opportunities and anticipate market fluctuations, it’s important to acknowledge that cycles can also vary based on local factors and broader economic conditions. Both macroeconomic and local market dynamics need to be considered when analysing property cycles and making investment decisions.
The Current State of Perth’s Property Market
According to CoreLogic, in the 12 months to December 2023, Perth’s median property value surged by 15.2%, reaching $660,754. This growth was not limited to property values alone; Perth also witnessed the fastest-growing rental market among capital cities, with median rents rising by 16.5% over the same period. These figures underscore the robustness of Perth’s property market and its attractiveness to both investors and homebuyers.
The latest data on Perth’s median property prices:
Source, CoreLogic, 1st February 2024
Drivers of Perth’s Property Growth
Perth’s property market dynamics are shaped by unique drivers, distinct from other major cities in Australia. Historically, mining booms and high commodity prices propelled property growth cycles in Perth. However, present-day growth is fuelled by factors such as population growth and economic prosperity. Western Australia boasts the country’s highest population growth rate, reaching 3.1% in the year to June 2023. This population influx, coupled with robust economic performance and attractive average earnings, contributes significantly to the demand for housing in Perth.
Major banks forecast continued property price growth in Perth in 2024. ANZ, CBA, NAB and Westpac anticipate price increases ranging from 6% to 10%. Perth’s property market is expected to outpace other capital cities, driven by strong demand, population growth and investor interest.
Perth’s property market presents compelling opportunities for investors:
- Projected price growth: With forecast indicating price increases of over 10% in 2024, Perth offers the potential for significant capital appreciation, providing investors with attractive returns on their investments.
- Record sales pace: Properties in Perth are selling at a record pace, with a median selling time of just 11 days. This rapid turnover indicates strong demand and limited supply, creating favourable conditions for sellers and investors alike.
- Population growth: WA’s population growth rate of 3.1% is the highest in the nation, driven by factors such as interstate and international migration, natural population increase and economic opportunities. The influx of new residents creates sustained demand for housing, supporting property market growth.
- Infrastructure development: Ongoing infrastructure projects, including transport networks, schools, healthcare facilities and recreational amenities, enhance liveability and attracts residents to specific areas. Infrastructure development stimulates property investment and drives growth in surrounding neighbourhoods.
- Supply and Demand dynamics: Fluctuations in housing supply and demand play a significant role in shaping Perth’s property market. Limited supply, coupled with growing demand, exerts upward pressure on property prices, creating favourable conditions for property investors.
- Low vacancy rates: Perth’s vacancy rate has remained below 1% since August 2022, indicating a tight rental market. Low vacancy rates make it challenging for renters to secure properties, driving demand for purchasing homes and providing landlords with stable rental income.
- Affordability and lifestyle: Perth offers relative affordability compared to other major cities in Australia, making it an attractive destination for investors seeking high rental yields and solid returns on investment. Additionally, Perth’s unmatched lifestyle amenities and natural beauty contribute to its appeal as a desirable place to live and invest.
Successfully riding the wave of Perth’s property cycle requires a nuanced understanding of market fundamentals, drivers of growth and cyclical patterns. By leveraging data, expert insights and an understanding of historical trends, property investors can position themselves to capitalise on opportunities and navigate market fluctuations effectively. As Perth continues to experience robust growth and heightened investor interest, the city’s property market remains a promising avenue for long term wealth creation and investment success.
References
https://propertyupdate.com.au/australian-property-market-predictions/
https://reiwa.com.au/news/house-prices-to-grow-10-per-cent-in-2024-reiwa-market-forecast-update
https://propertyupdate.com.au/the-latest-median-property-prices-in-australias-major-cities/
https://www.abs.gov.au/statistics/people/population/national-state-and-territory-population/jun-2023
