For the first time in 11 years Perth’s residential property market is on track to record double-digit growth with Corelogic reporting that in the 12 months to March 2021 Perth houses have risen 15.4 per cent and units 9.6 per cent with many suburbs already about 10 per cent above their 2014 peaks. This is likely to be just the start of another boom that could last in excess of 7-10 years, with 70-100 per cent more growth and net rental returns of 60-100 per cent higher than Sydney.
From 1992 to 2007, Perth recorded the highest increase in house prices of any Australian city, with 492 per cent growth! While much of that growth was fuelled by the resources boom, Perth has since experienced nearly 20 years of little to no growth – until this year. During this time, incomes and rental returns have been slowly creeping up while supply has been reducing.
Perth is now the country’s most affordable capital city housing market, however the Australian Bureau of Statistics states Perth’s income is about 3 per cent higher than Sydney, yet property prices are less than half of Sydney’s median, which now sits above $1.3M whilst Perth sits at $537,000.
What’s driving the huge growth forecast?
The key fundamental drivers of property growth including affordability, high rental returns and low interest rates are stronger now than ever before, even than at the start of Perth’s record 492 per cent boom between 1992 and 2007, when Perth’s median house value of $91,000 started at less than half of Sydney’s $173,000 to end up at the same median value.
Perth subsequently had nearly 20 years of no growth, while Sydney boomed again. This price difference, which is actually one of the biggest drivers of interstate migration and property price growth, is now a lot bigger than in 1992.
Record iron ore prices and a huge gap between supply and demand, where vacancy rates are now at around 0.8 per cent – half Sydney’s 1.6 per cent are also key drivers.
$27.1 Billion Major infrastructure boom
In an effort to protect Western Australian jobs and create more opportunities for local businesses amidst the economic impacts of the COVID-19 pandemic, the Western Australian Government has approved new measures to streamline construction contract approval processes and expedite $140 million of road and maritime projects.
Other major infrastructure project investments are also getting a boost under the Western Australian Government’s WA Recovery Plan. Investments in defence, port and harbour infrastructure, and serviced land to help establish new business and research facilities will deliver a strong pipeline of jobs for Western Australians with a total value of close to $27.1 Billion over the four years to 2024.
Why Perth and not Sydney?
With a property in Perth costing, on average, 24.8 per cent of the local median weekly income, versus Sydney’s costing 44.6 per cent of the local median weekly income, affordability is a major factor.
In addition, Sydney has just finished a boom cycle and is forecast to have little growth for about 7 years with low rental returns and affordability (plateau cycle), whereas Perth is moving into a growth phase of it’s cycle. This means that over the next 7-10 years for $1,000,000 of invested property, you are likely to see $800,000 to $1,200,000 higher total growth and rental returns.