While 2023 is predicted to be another chapter in the housing market’s books characterised by price corrections, one state body is expecting a different story to unfold in the west.
The Real Estate Institute for Western Australia (REIWA) forecasts the state’s strong property market conditions will continue, with the real estate body estimating Perth house prices to record moderate growth ranging between 2 and 5 per cent in the next 12 months.
REIWA chief executive Cath Hart cited the West Australian capital’s strong performance in the previous year to support the institute’s calculations.
“Perth’s median house price rose 2.86 per cent to $540,000 in 2022, up from $525,000 in 2021 — this was despite the eight interest rate rises, which have seen east-coast markets go into decline,” she stated.
The executive also highlighted that Perth continues to be one of Australia’s most affordable capital cities by median house price. And while prices in the city have risen in the past two years, there are still areas where median prices are below the previous peak recorded in 2014 and 2015.
For comparison, the latest data from CoreLogic showed that Perth’s eastern counterparts — Melbourne and Sydney — had median dwelling values of $752,777 and $1,009,428, respectively, at the end of the year.
Darwin was the only other capital city to record an average price range close to that of Perth’s, with the Northern Territory capital recording an average property value of $506,710 during the period.
“Perth’s forecast price growth in 2023 will be supported by ongoing low supply and strong demand,” Ms Hart stated.
In December, sales activity across the city remained strong, with the average weekly reported sales figure sitting at 895 — up from 870 during the same month in 2021.
“We anticipate sales volumes to remain at about this level in 2023,” Ms Hart said.
Coinciding with this strong demand is supply being 10 per cent lower than they were this time last year and almost 34 per cent lower than what they were three years ago.
“As building completions increase over the next 12-18 months, we anticipate listings will start to increase; however, they will remain below historic averages,” Ms Hart noted.
But she pointed out that any gains in new listings will be offset by population growth that will drive demand.
“WA’s population grew 1.3 per cent in the year to June 2022, and the state government’s recent mid-year budget review forecast further growth of 1.5 per cent in 2022 to 2023.
“As more people arrive in WA, this will maintain the demand for housing and keep listings low,” she said.
Ms Hart acknowledged other factors that can potentially derail Perth’s projected growth trajectory, including the Reserve Bank of Australia’s monetary policy tightening, which was kicked off in May to stem surging inflation and is widely expected to continue into 2023.
She said that based on current market expectations, interest rates are anticipated to have a minimal impact on the West Australian market, in contrast to other states.
“WA buyers have become more cautious and price sensitive following eight consecutive interest rate increases in 2022,” Ms Hart said.
“But so far, the local market is weathering interest rate changes well, supported by a strong economy, low unemployment and continued population growth.
She reiterated that Perth’s housing affordability has given buyers and mortgage holders plenty of financial room to absorb interest rate rises.
“We are closely watching what the RBA does but are cautiously optimistic for the outlook in WA over 2023 based on current conditions,” she said.
But with buyers starting to adjust their expectations and budgets in response to reduced borrowing capacity, REIWA anticipates greater sales activity in the low-mid price brackets in 2023.
Another bright spot in the state’s property market is its regional centres, where conditions are expected to remain strong in 2023.
“All regional centres saw median price growth in 2022, with Busselton the top performer,” Ms Hart said.
She highlighted that the beachside region has been a consistently strong performer over the past few years, both quarterly and annually, thanks to its strong population growth.
During the September quarter, Busselton notched gains of 5.4 per cent — making it one of the top performers among West Australian regional markets.
“There are three mining companies that fly out of Busselton, so the area is attracting FIFO workers who come down to enjoy the lifestyle,” Ms Hart stated.
In addition to positive demographic trends, Ms Hart pointed out that regional areas have also benefited from an increase in the work-from-home/micro business trend, with the idea of having to live where you work significantly changing post-COVID-19.
The executive noted that lifestyle is expected to remain a driving factor behind where people choose to live in 2023, especially if there are local employment opportunities in regional areas.
“We have some of the most affordable housing in the country, especially in our regional towns.
“They offer enviable lifestyle opportunities and are likely to attract strong demand from buyers as WA’s population continues to grow,” Ms Hart said.
When it comes to the city’s rental market, Ms Hart said 2023 would see tenants doing it tough once more, echoing the conditions in 2022 that proved to be a “challenging year for tenants”.
“Rental listings hit a 12-year low at the end of September, and while they improved in the last few months of 2022, they remain nearly 17 per cent lower than this time in 2021.
“The vacancy rate lifted slightly during the year before dropping back to 0.7 per cent, and the median weekly rent was $500 at the end of November, which was $60 higher than a year ago,” she explained.
With positive net migration seen to maintain demand for rental properties, REIWA anticipates upward pressure on rental prices to continue.
However, Ms Hart said there are some positive signs for the coming year.
“After seeing investors leaving the market in the past two years, with more than 18,000 fewer rentals in the market now since the peak in January 2021, we are starting to see some improvement in investor interest, particularly from eastern states investors who see value in WA’s house prices and the potential for strong rental returns,” she said.
She said that while the trend is a positive indication that rental stock levels will rise, she professed that it would take some time for the impact to be felt.
“Rental listings will remain low in the medium term but are expected to improve over the next 12-18 months, as both building completions and investor activity increase,” she said.
Perth’s rental market is also facing headwinds, with the proposed changes to the Residential Tenancies Act (RTA) continuing to raise concern for market observers.
Changes to the state’s rental market laws were initially raised following a review by WA Consumer Protection in 2019.
Some of the recommended changes include the removal of the right of a property owner to terminate a tenancy unless done so on prescribed grounds, as well as the proposal to remove the requirement of a tenant to seek the consent of the property owner to make modifications to the property.
REIWA had previously slammed the proposals, warning that changes to the state’s residential tenancy laws at a time when available properties for rent are scarce would only plunge the region deeper into a rental crisis.
Echoing former REIWA president Damian Collins’ sentiments, Ms Hart underlined that the rental shortage remains a “critical issue” for the state, adding that changing Western Australia’s tenancy laws that discourage existing owners and would-be investors will make an “already tough situation worse”.
“We desperately need more investors in the market to help provide housing and keep rental prices affordable.
“REIWA has been working with the state government to achieve a sensible outcome to the RTA Review that is fair and equitable for all parties,” Ms Hart said.