Is the market plateauing?

Perth’s steady property price growth continues, with a nearly 0.4% increase last week. Our first chart shows that prices are now up almost 17% for the year, and we are still projecting annual growth of around 25%. Median house prices jumped by nearly $3,000 this week, bringing the total to just under $780,000.

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The average weekly price growth for 2024 is 0.43%, so this week’s increase of nearly 0.4% is relatively close to the average. The following chart indicates visually that the weekly increases have been quite close to the average, suggesting that the weekly growth is consistent. However, there are some signs that the property boom may have slowed slightly.

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A decade ago, those in the property market will recall how Perth’s market soared in 2013-14, only to plateau in early 2015 and enter a long period of negative growth that did not turn around until late 2019. That decline in property prices was closely tied to a sharp drop in population growth as workers left the state following the end of the mining boom’s construction phase. While today’s dynamics are somewhat different, there are parallels, particularly with WA’s reliance on the Chinese economy for exports. The experience from ten years ago has made us more cautious, reminding us that booming property markets do not last forever. We are constantly watching for signs that the current boom could be plateauing.

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We have included the chart below to show that some heat may be coming off the market. It is similar to the previous one but tracks growth since April and includes a trendline. The red trendline slopes downward, indicating that while weekly price growth remains strong, it is slowing down, although marginally.

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The main reason Perth prices have been rising so quickly is the high demand in the face of weak supply levels. However, as the next chart reveals, that disequilibrium driving price growth is narrowing as the gap between weekly sales (demand) and listings for sale (supply) closes. This chart further suggests that some heat may be coming out of the market.

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Rising property prices may encourage more homeowners to sell, contributing to the increase in listings for sale seen in the chart above, and consider renting as an alternative. A steadier rental market may also be encouraging this trend. Perth’s median rent has held steady at $650 per week since March, and the chart below shows a rise in rental listings from March to July, which helps explain why rents have not climbed further. However, rental listings have recently started to decline. Typically, a drop in rental listings could be linked to an uptick in migration, as new arrivals tend to rent initially. However, with overseas migration being cut in half by the federal government this financial year, the decrease in listings potentially signals that renting is becoming a more attractive option amid soaring property prices.

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So while a marginal decline in weekly price growth, rising listings for sale, and a drop in listings for rent may suggest Perth’s property boom is beginning to slow, it is also possible that these movements are seasonal, and we could see a pick up again in Spring.

Review by Ryan Brierty.