Stock levels decline to lowest on record
Perth’s property price boom keeps rolling on. Prices increased by 0.44% last week, almost precisely our 2024 average of 0.46%. This week’s growth compounds the consistency over the past five months, as illustrated in the following chart.
The consistency in weekly price growth is replicated in the disequilibrium between demand (weekly sales) and supply weekly listings demonstrated in the next chart. Perth has only 3,270 properties for sale, of which nearly 500 are vacant land, meaning there are approximately 2,700 dwellings for sale. And while Perth recorded 901 weekly sales last week, it is almost unthinkable that 830 sales were for dwellings from a pool of 2,700. In other words, nearly one-third of dwellings on the market were sold last week. Furthermore, the gap between demand and supply has somewhat widened over the past two months. These figures indicate that despite homebuyers’ limited choices, they are buying what’s available anyway.
The effects of the disequilibrium are evident in the next chart. Perth median property prices increased by $3,200 last week, with Perth recording a median value of more than $734,000. Since we started tracking weekly changes to the Perth median property price a little over two months ago, prices have increased by more than $30,000, equating to nearly $3,400 per week. While the market retains the current dynamics, we are projecting the median property price to hit $843,000 by the end of the year.
In light of the rapidly rising median house price, we were going to compare home buying in 2004 compared to 2024. To make the comparison accurate, it needed to be relatively more in-depth than I intended so we will review the comparisonon next week. One of the interesting components of the comparison is inflation and interest rates.
Last week, the Australian Bureau of Statistics (ABS) released the latest monthly inflation figures. The bad news is inflation increased from 3.5% in February to 3.6% in March. Now, this minor increase taken in isolation would not be an issue. However, the problem is that monthly inflation has been rising slightly since December last year, and the Reserve Bank of Australia (RBA) will not like how long it is taking to get back into the 2-3% range. The RBA will consider a rate rise if we get two more months like this. Furthermore, the Stage 3 Tax Cuts commencing in July this year will likely increase household consumption, making it more difficult for the current level of interest rates to keep inflation trending downwards.
From an inflation point of view, the bright news is that unemployment increased from 3.9% in March to 4.1% in April. Those who saw our newsletter four weeks ago discussing the Phillips curve would appreciate that while it is terrible for people who lost their jobs last month, if higher unemployment can place downward pressure on inflation, the prospect of interest rates not increasing is excellent news for the millions of households with a mortgage.
Reproduced with permission from:
Ryan Brierty,
in house economist from Michael Keil @ michaelkeil.com
