Weekly review of Perth property market
Perth prices bucked the recent downward trend this week, posting a 0.9% increase, and the following chart illustrates that this is the first price increase in two months.
However, the RBA increased interest rates again this week. The more conservative 0.25% increase in the cash rate (the ASX responded positively to the increase because the market was relieved it was not 0.5%) will increase borrowing constraints and continue to place downward pressure on prices. While the labour market is robust and the average household is well ahead of their mortgage, we do not anticipate an increase in the supply of listings due to mortgage stress and foreclosures. So we are anticipating reduced demand from increased borrowing constraints but not an increase in listings due to foreclosures.
Perth’s current undersupply of listings and the limited or delayed construction of new dwellings will help support property prices. This week Perth recorded 8,116 properties for sale, which is in line with last week. Approximately 12,000 listings are an industry-accepted equilibrium; as the following graph reveals, Perth has been below that accepted equilibrium since late April 2020. It is no coincidence that property prices have increased during this period; however, the Covid stimulus and low-interest rates have contributed.
Perth’s sales took a 10.9% decline this week, recording 734 transactions. We are always mindful of aberrations associated with weekly data, but this is the first time sales have dropped significantly below the 800 sales bound since interest rates started to rise in May this year. If this decline continues, it supports the conclusion that interest rates are increasing borrowing constraints.
Fortunately, this week, rental listings took a break from their downward trend, with Perth recording 1724 properties available for lease. However, there is no optimistic news for tenants, with the media widely reporting that rental listings are at the lowest level since November 2010, when Perth recorded 1537. There are nearly 26% fewer available rental properties than 12 months ago, so it is no surprise that over the past 12 months, rents are increasing faster in Perth than in any other capital city, with the following chart indicating Perth rents have increased by 9% annually and 2% for the quarter. REIWA has also reported that median rents increased by $15 to $495 per week in September alone!