Perth rental vacancies drop to new low for 2023
Property prices in Perth continue to respond to the current undersupply of housing, consistently high level of demand, population growth and robust employment, with prices rising by nearly 0.2% again this week. Our “Perth Property Price Growth 2023” chart reveals that prices are up almost 5% for the year.
This week’s price rise continues to support our projected 9% annual increase, with the actual growth rising at the same rate as the projected increase. According to the Real Estate Institute of Australia, the Perth median house price increased to $560,000 in July, 4.7% higher than this time last year and is above the previous peak of $545,000 set in 2014. If our projected price increase is maintained, we anticipate the median house price to be approximately $580,000 by the end of the year.
For the price growth forecast to occur, Perth must demonstrate the consistently high levels of demand it has been experiencing over the past six months. Perth recorded 868 transactions last week, and as the “Perth Weekly Sales” chart below illustrates, despite demand being slightly lower over the past few months, sales are still falling comfortably within our 800-1000 range.
While demand is a significant predictor of property price, so is supply and recently, the decline in established dwellings for sale has definitely flattened out. Perth recorded 5,280 properties for sale this week, and as our “Perth Weekly Listings” chart reveals, the supply of new property onto the market is approximately level with sales, which is why the number of properties listed for sale each week is no longer falling. If we start to see listings rise, then there has been a change in the dynamics of Perth’s housing market concerning supply and demand.
While listings for sale have plateaued, unfortunately for tenants but fortunately for property investors, listings for rent have recently declined. Perth recorded 1635 properties available for rent this week, the lowest level this year. The “Perth Rental Listings” chart below shows that while listings rose gently between January and June, the supply of rental properties has recently declined relatively steeply. According to REIWA, Perth’s rental vacancy rate is 0.9%, well below the equilibrium of 3%, and will likely cause rents to keep rising. The July median rental price is $580 per week, up from $500 per week 12 months ago (which equates to a $4000 annual increase).
The one significant predictor of property prices that we intentionally missed at the start of the article is interest rates. Inflation is the primary indicator the Reserve Bank of Australia uses when deciding whether to raise or lower interest rates. The Australian Bureau of Statistics (ABS) released the July monthly inflation figures this week, revealing that prices rose 4.9% over the past 12 months, down from 5.4% in June.
The RBA will almost certainly leave interest rates on hold next week. The drop in inflation and the slight increase in the national unemployment rate in July means the gap between inflation and unemployment in the chart below is closing, leading us to believe the RBA will continue to pause the current cycle. Furthermore, the continuing signals of the economic downturn in China that we reported last week will have been noticed by the RBA, encouraging them to leave rates on hold.