Perth median house price hit $704,000 in March
The Perth property price boom momentum is still gathering pace. Over the past two weeks, Perth property prices increased by 0.6% and nearly 0.5%, respectively, meaning prices increased by more than 1% over the past fortnight. Property values have been rising at an average of 0.45% each week since the beginning of the year, and the red trend line in the following chart indicates that the weekly price growth is accelerating.
The next chart reveals prices have risen by nearly 6.5% for the year, and according to CoreLogic, Perth’s median house price hit $704,000 at the end of March. If prices continue to rise by the 0.45% weekly average, Perth is on track for an annual increase of more than 23%. Furthermore, if this growth rate is maintained for the rest of 2024, Perth’s median house price will be more than $820,000 by the end of the year.
A recent report by BIS Oxford Economics has forecast Perth’s price growth to continue leading the other capital cities. The local median house price is predicted to be above $1 million, and units will be nearly $650,000 by June 2027. The next table indicates that Oxford Economics forecasts Perth units and houses to increase by 30%.
However, according to Oxford’s senior economist, the forecasts may be conservative:
”There’s a definite risk that our price forecast for Perth will prove to be conservative because that market has a tendency for significant upswings and downswings in price cycles that dwarf other markets. It had a long period after the mining boom where it underperformed, so it’s primed to re-establish itself with the other markets.”
The thought these forecasts might be conservative will cause greater concerns regarding affordability. However, although BIS Oxford Economics is very reputable, it does not mean their predictions will be accurate.
In January 2019, we published a newsletter reporting Oxford’s forecast of a less than 10% rise in Perth dwelling prices between 2018 and 2021, as illustrated in the chart below. In 2019, the Perth real estate market was starting to emerge from its slump, but at that time, rental vacancy rates were high, and rents were comparatively cheap. The Curtin Bankwest Economic Center published a report in 2019 that renting would be slightly preferable to buying if Perth prices increased by less than 2.9% per year for the next ten years. After four years of negative or minimal growth between 2015-19, 3% per year sounded positive and aligned with Oxford’s 2019 forecast. However, this was well below the actual rises Perth has experienced to date, driven by the COVID-19 housing stimulus packages, housing undersupply and population growth. Furthermore, you would be hard-pressed to find a tenant in the current market who would prefer to be a renter than a homeowner.
The point is that forecasting is not an exact science, and unforeseen events can arise at any time.
Nevertheless, Perth’s property prices are rising rapidly and increasing the equity homeowners have invested in their property. However, higher prices not only shut potential buyers out of the market but lead to increased mortgage debt with greater risks. The following chart reveals that the average mortgage in WA has increased by nearly 40% from $368,000 to over half a million dollars. Increased mortgage debt reduces household consumption and makes it more complex for mortgagors to be outright owners at retirement.
Reproduced with permission from:
Ryan Brierty,
in house economist from Michael Keil @ michaelkeil.com
