Perth Property Market Update – September Edition

Presented by Fox Mortgage Services


Perth’s Property Market Defies National Trends Despite High Interest Rates

August’s CoreLogic data shows a 19th consecutive month of housing values growth, however the rate of growth has slowed with some capital cities recording losses.

Perth continues to lead the nation in property growth, with home values rising by 2.0% in August 2024, the strongest performance among all Australian capital cities. This growth has propelled the median dwelling value to $785,250, making tPerth’s median price higher than Melbourne​​.

Eliza Owen, Head of Research at ,oreLogic, emphasised Perth’s exceptional position, stating, “This is the first time that Perth’s median dwelling value has been higher than Melbourne’s since February 2015”​.


First-Home Buyers: A Key Player in Perth’s Market

Perth’s affordability has been a significant driver for first-home buyers, who have been active participants in the market. According to recent data, first-home buyers accounted for nearly 34% of all new housing loans in Western Australia over the past 12 months. This is substantially higher than the national average, reflecting the city’s appeal to younger buyers and those looking to enter the property market for the first time.

First-home buyer growth has not been dampened by the now low limit of $600,000 on the Federal Government’s First Home Guarantee Scheme or the Western Australian government’s First Home Owner Grant (FHOG) limitations and lack of stamp duty concessions.

There has been an increase in guarantor loans. “With many first home buyers purchasing above the $600,000 we are seeing a significant increase in parental assistance” Fox Mortgages broker Paul Fox explains, “A deposit of 20% is unachievable for most first home buyers and many are relying on using their parent’s property as security allowing a much smaller deposit to be used”.


Tight Supply Drives Competition

One of the primary factors behind Perth’s price growth is the continued shortage of available housing. Listings are down more than 40% compared to the five-year average, creating fierce competition among buyers​. First-home buyers, in particular, are often competing with investors and interstate buyers for limited properties, pushing up prices in more affordable suburbs.

CoreLogic’s data shows that the lower quartile of Perth’s housing market—comprising the most affordable 25% of homes—grew by 2.7% in the three months to August, as buyers flock to these more affordable areas​. Suburbs such as Kwinana (31.4%), Gosnells (29.7%), and Armadale (29.4%) are seeing rapid value increases due to their relative affordability​.


Who’s Buying in Perth?

In addition to first-home buyers, Perth’s market is attracting a diverse range of purchasers, including investors and interstate buyers seeking better value compared to Sydney. With the median home price in Perth far below Sydney’s $1,180,463 and Brisbane’s $875,040, the city still offers an attractive alternative​​.

For investors, Perth’s rental yields, currently at 4.3%, remain a strong selling point. The tight rental market, driven by population growth and limited supply, has led to a 11.4% increase in rental values over the past year​.


High Interest Rates: Impact and Strategies for Buyers

Despite Perth’s strong property market, the broader Australian economy continues to grapple with high interest rates. The Reserve Bank of Australia (RBA) has kept the official cash rate at 4.35%, a 13-year high​. RBA Governor Michele Bullock has made it clear that rate cuts are unlikely soon, stating, “If the economy evolves broadly as anticipated, the board does not expect that it will be in a position to cut rates in the near term”​.


Navigating the Interest Rate Environment: Fixed or Variable?

Whilst the RBA’s stance on interest rates remain high, the last couple of weeks has seen over a dozen lenders cut their fixed-rate offerings, reducing fixed mortgage rates by up to 0.7%, with one lender offering 2 and 3 year fixed rates from 5.59%. This may be a chance for buyers  on a budget to benefit by splitting their loans between fixed and variable rates to manage the impact of rate changes.

RBA Governor Michele Bullock recently emphasized that rate cuts are premature, reinforcing that “inflation is the number one risk to the household economy”. However, as inflation pressures ease, buyers could see variable rates drop in the medium term​.


Rental Market: Tight Conditions, Strong Returns for Investors

Perth’s rental market is facing significant strain, with rents rising by 11.4% over the past 12 months​. For first-home buyers struggling to enter the market, renting remains a challenging alternative, with limited availability and increasing prices. However, investors are benefiting from these high rental yields, which continue to offer attractive returns.

The strong yields, however are boosting borrowing capacity limits and giving opportunity for first time buyers to rentvest.


Market Outlook for Spring

Looking ahead, Eliza Owen from CoreLogic has highlighted that affordability may soon become a constraint, particularly for first-home buyers: “Housing values cannot keep rising at the same pace in the mid-sized capitals of Perth, Adelaide, and Brisbane when affordability is becoming increasingly stretched, particularly in the context of elevated interest rates and cost of living pressures”​.

As we enter the spring selling season, buyers and investors need to get buy ready, as new listings typically increase, but so does competition. With rising prices and high rental yields, Perth remains a prime market for those looking to invest or secure their first home.


Act Now with Fox Mortgage Services

Whether you’re a first-home buyer, an investor, or looking to refinance, Fox Mortgage Services is here to help you navigate Perth’s competitive property market. We offer personalised mortgage solutions tailored to your financial goals and can guide you through the process of securing the best loan for your needs.


Contact us today to explore your options and make the most of Perth’s thriving real estate market.


Sources:
CoreLogic September 2024 Report
PropTrack August 2024 Report
RBA Governor Michele Bullock Speech, September 2024​​​​.