Perth Property Predictions 2023: Everything You Need to Know
As we enter 2023, the Perth property market is facing rising interest rates however, rental vacancy rates are lower than ever, and rental returns have been increasing.
It’s fair to say the real estate market conditions in Perth are much better than in other states and territories across Australia.
In fact, the property market in Perth is expected to grow in 2023, so WA investors should be on the lookout to identify opportunities.
In this article, we highlight what we believe Perth property investors and landlords will see in 2023.
The impact of the 2022-2023 federal budget on the real estate market
With rising inflation rates accompanied by high-interest rates, it’s no surprise that the 2022-2023 federal budget placed an emphasis on alleviating some cost pressures West Australians face due to the rising cost of living.
The budget aimed to tackle five key areas: families, housing, aged care, the NDIS, and health. Affordable housing, in particular, is a key focus.
The government is projecting to spend $350 million on 10,000 affordable homes over a five-year timeline. This is in addition to its commitment to building almost the same number of homes in the same period. The government has also allocated $324 million to the shared equity scheme.
Moreover, the new National Housing Accord states that over one million affordable, energy-efficient, and well-located homes are to be built in Australia starting in 2024.
Real estate investors should expect a positive impact on the property market, with the government allocating more resources to infrastructure projects and agreeing on the historic National Housing Accord.
Property buyers, on the other hand, will benefit in numerous ways. First-home buyers will be able to find affordable housing more easily, and senior homeowners will gain help downsizing.
Perth’s vacancy rates hitting a record low
For the past several years, Perth’s vacancy rate has been hovering around 1%. In December alone, Perth’s rental vacancy rate fell to 0.6%. That’s the lowest in 42 years.
So what does that mean? It’s simple: the rental market in Perth is stable. Most real estate experts consider a stable, balanced market to have a vacancy rate in the range of 2.5 to 3.5%.
This is also a good indicator of the limited availability of rental stock. Rental listings are very few, though the number of listings reached around 2,000 in mid-January 2023, which is 10% more than in mid-December but still lower than it was in 2021.
Regional areas, in particular, have witnessed exceptionally low vacancy rates, which can be summarised as follows:
- Albany: 0.3%
- Kalgoorlie: 0.5%
- Geraldton: 1.5%
- Bunbury: 2.5%
- Broome: 7.1%
The highest on this list is Broome, but keep in mind that this is a seasonal market. Rainy months often witness higher vacancy rates in Broome.
The WA market needs property investors more than ever, particularly those who’re planning to lease their properties to tenants.
Interest rates continue to rise, but not for long
Home buyers have a lower borrowing power due to rising interest rates in 2022-2023. When a borrower applies for a loan, they’ll receive a higher interest rate than, say, in 2021 or even early 2022. Add to that the increasing costs of living and we can say that the national property market is vulnerable to recession.
That’s why housing prices are declining; people simply can’t borrow as much as they were able to borrow before.
Even if a person risks opting for a high-interest loan, the correspondingly high costs of living will eventually make them change their mind.
However, the interest rates are widely expected to stabilise by March, which paves the way for a more balanced property market. This may cause property pricing to rise in some areas as more people will be more confident when taking out loans. The increase in the number of skilled migrants and international students should also translate to higher home rentals and prices.
A strong market that’s survived some of the most challenging economic circumstances
The Perth property has remained on its feet despite the recent economic disruptions. These include the rising interest rates and the COVID-19 pandemic. As China has started to recover from the effects of the pandemic, more and more Chinese investors are willing to invest in the Perth property market.
Perth yields 5% return on average for houses and 6% for units, compared to Sydney’s 3% and 4% for houses and units, respectively. This means that Perth is the ideal market for investors that are looking for a higher cash flow.
Perth property investment in the long-term
Experts are expecting a 30% growth in Perth property prices in the period from 2023 to 2027. Despite going through some pricing fluctuation waves, the Perth property market is still expected to grow significantly in the long term.
Property values may even double by the late 2030s.
The rental market landscape
2022 wasn’t really a forgiving year for tenants. Rental listings were scarce, the median rent was $500, and investors were quitting the market.
But not all hope is lost yet, as we’re starting to notice an upward shift in investor activity in 2023, contributing to higher rental stock levels. By the same token, rising net migration rates will generate demand, which may cause noticeable increases in the median rent in 2023.
A flourishing sales market
Housing sales have seen steady growth since 2021, reaching a weekly average of 895 properties up from 870. It’s also expected that sales volumes will hover around the same level in 2023.
Building completions are set to increase this year, which could cause the number of listings to go up. But as the population growth rates in WA increase, the boost in the number of listings won’t feel relevant.
Population growth in WA was estimated at 1.3% in mid-2022, and it’s expected to reach 1.5% in 2023. Thus, even though the demand for housing in the region will increase, the demand-supply ratio will remain the same.
WA buyers are less keen on investing in real estate than in previous years due to interest rate instability, but the WA property market has still maintained a strong position thanks to a growing mining industry, accelerating population growth, and low unemployment rates. The economic difficulties haven’t affected the WA real estate market as much as in other states.
Therefore, sales in Perth are expected to increase in 2023, particularly in the low-mid market segment.
The supply-demand game in the Perth property market
Supply is limited relative to demand in Perth in early 2023. Many buyers are taking a “wait-and-see approach” when it comes to the RBA’s decisions regarding interest rates. This presents an opportunity for new buyers and interstate investors to get into the market. While finding a property won’t be easy, investors will further reap the benefits once the interest rate stabilises.
Attractive houses are rising in value, while less-exciting properties will submit to the market prices. When the RBA stops increasing the interest rates and we start adjusting to the new norm, the supply and demand mechanics will inevitably lead to broad-based growth.
Regional WA market remains strong
The regional WA market is expected to witness relatively stable growth across 2023. Offering some of the country’s most affordable housing options, the WA region has seen steady growth in recent years.
Many factors, like population growth in the region, changing lifestyle preferences, and an upward shift in the work-from-home trend, contribute to this. People no longer need to live where they work, making a lot of house seekers opt for more affordable options in the WA region.
In 2022, regional centres witnessed a growth in the median price, and it’s expected to continue well into 2023 despite rising interest rates.
The value of a rental appraisal
With so many external factors having a direct effect on Perth’s property market, deciding how much you should charge your tenants can be challenging.
Ideally, you need to find the best trade-off between maximising profits and giving your quality tenants a rate that’s fair enough to retain them.
As a property investor or landlord, getting a professional appraisal can be a great way to navigate the ever-growing real estate market in Perth.
A typical rental appraisal starts with property, target market, and location analysis, followed by rent calculations and a rental appraisal report that walks you through a step-by-step process to maximise your cash flow.
The beginning of 2023 is the perfect time to get a rental appraisal, though we encourage you to get one of these on a regular basis to keep up with market fluctuations.
Get a free rental appraisal now – zero obligations
If you want to come out as a winner from the ongoing economic uncertainty and maximise your ROI in 2023, now is the best time to get a professional rental appraisal from the experts.
Reach out to us now to arrange an appointment for your free rental appraisal!