With financial year-end work deadlines, parties and bargain shopping abounding across Australia, the financial year 2022/23 has drawn to a close and we welcome the new financial year 2023/24.
Reflecting on the last financial year, here are some highlights:
- There have been 12 interest rate hikes over the year and stubbornly high inflation. Inflation rate is looming at 7.1 percent according to the Australian Bureau of Statistics.
- Western Australian property market growth was driven by population growth, an economic expansion of 4.5% and a record high of 1.53 million Western Australians employed.
- According to REIWA, more people turning to the established homes market due to the delays and rising costs in the building industry and the challenges of the rental market.
- Perth’s rental market continues to remain tight with limited supply and demand. Median rents reached new heights in June with the median house price hit a record $580 per week, up from $570 in May and $500 at the same time last year. The median unit price also set a new record. It rose $20 over the month to $520 per week. This was $80 higher than June 2022. Perth’s median dwelling rent price remained unchanged at $550 per week, reflecting a large number of leases around that pric.
- Median house values across Perth increased 3.9 percent over 2022, with a 0.2 per uptick in December to $586,721. Unit values increased 1.1 percent, with a 0.4 cent decline last month, to $406,621. House values in regional WA increased 5.6 percent over the year, including a 0.5 percent increase in December. Vacancy rates hover around 0.6 percent* in Perth Metro areas.
- Perth is still the most affordable capital city in Australia to live in and afford a home. A survey from Canstar revealed that Perth is the only capital city in which the average earning single prospective home buyer could afford mortgage repayments on a mid-priced home.
So what do we expect for the next financial year 2023/24?
- REIWA expects property prices to hold firm in the first half of 2023
- Rent prices to increase in Western Australia with the continued tight supply.
- Interestingly, Australia’s biggest lender, Commonwealth Bank of Australia expects a 15% fall in home prices nationally over the next 18 months due to faster and higher interest rate hikes, with the biggest impact to be felt in the Eastern States.
- With renters facing declining affordability pressures, more rental demand is expected towards higher density options.
- There will be more rental households that will have house-shares and increased tenants per rental dwelling.
In conclusion:
According to 2023-24 State Budget shows Western Australia’s economy remains strong despite global economic headwinds. According to Western Australia Treasury Corporation (WATC), the economic growth is expected to ease to 2.25% in 2023-24 as household spending slows in response to higher interest rates and as exports (both goods and services exports) return to more typical rates of growth. This is lower than the expected growth of 4.25 percent in 2022-23, the highest growth in nine years, underpinned by strong exports.
Population growth will continue to drive the Perth real estate markets, and this will put further pressure on the rental market. The ABS forecasts that Perth will likely grow to 2.9 million by 2031 (3.5 million by 2050) as opposed to our current population of 2.83 million, hovering around a growth rate of around 1.2 percent.
To help accommodate this growth, the State government has announced that it will release an unprecedented amount of land on the fringe of the city however, there is still a shortfall of properties for the first half of the financial year.
While the increase in real estate prices may not be as high as last year or even see stagnation or fall, this is mostly influenced by RBA’s decision to aggressively raise interest rates.
*CoreLogic reports that the city-wide vacancy rate for September 2022 was just 0.6%. REIWA’s latest data, which covers August 2022, recorded a vacancy rate of 0.8%. Meanwhile, SQM Research recorded a vacancy rate for September 2022 of just 0.4%.
