Perth listing supply continues to increase

Last week, CoreLogic, whose Home Value Index we rely upon for measuring dwelling price growth, made significant revisions to their index values. While any improvement in accuracy is welcomed, these changes have resulted in amendments to the results we have been reporting. However, the revised results still demonstrate that the market is cooling slightly earlier than previously reported.

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So, let’s see what happened last week and how our charts have altered with the new index values. Prices increased by 0.31% last week, mirroring the previous week’s increase. As the following chart illustrates, since late July or early August, weekly growth has been below the 2024 average of 0.39%. The bars in green highlight the weeks where growth is below 0.3%, and since July, the lower growth is evenly spread suggesting that it has plateaued and stabilised.

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Our 28-day moving average chart below has also changed. The chart shows the average peaked at 0.51% in mid-April but then declined relatively consistently to a low of 0.28% in late September, where the average currently sits. The stable average of 0.28% over the past 6 weeks aligns with our observations from the chart above, where the market cooled noticeably around the middle of the year but has stabilised recently. However, while the average may have fallen to 0.28%, to put this into perspective, 0.28% weekly growth based on the current median house price represents a weekly increase of more than $2,200 or $115,000 annually. The market is still heavily favouring sellers, just not as heavily as before. The orange line represents weekly growth of 0.15%, approximately 8% annually, and is far more sustainable than the current 0.28% and 15.2% yearly.

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The revised data also affected our median house price calculations and projections for 2024. We previously projected a median house price of approximately $825,000 to $830,000. With the revised figures, the following chart shows Perth has a median house price of $794,000, and we are now expecting a median price below $820,000, as indicated by the dotted trend line. While not very noticeable, the price (the blue line) is dipping away from the trend line, reflecting the lower growth recently.?

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We anticipate that the growth rate should continue to slow, particularly with the federal government’s 50% reduction in overseas migration. However, the primary reason for the market cooling has been the increasing supply of established dwellings for sale. While demand remains rock solid, with Perth recording just below 1000 sales last week, supply continues to increase as Perth reported listings for sale above 5,000 for the first time in 14 months. The 5,163 properties listed for sale are almost 60% higher than the low point of 3,144 in early July.

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Our following chart illustrates why Perth’s market has been so hot over the past 18 months, as listings (supply) fell away while sales (demand) remained consistently strong (the sharp drop in sales over Christmas is normal). Any market that experiences these kinds of demand and supply dynamics will see prices rise. Nevertheless, the chart also reveals the steep increase in listings over the past three months; hence, price growth is slowing. Furthermore, there is no sign of listings plateauing, so we think there will be a further slowdown in the market.

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According to the Australian Bureau of Statistics (ABS), owner-occupiers and investors have driven the strong demand for Perth property over the past 18 months. Notably, January 2021 peaked first-home buyer and owner-occupier lending but then tailed off. However, over the past 18 months, owner-occupier and investor lending has increased while first-home buyers have remained flat. This may well reflect first-home buyers’ difficulties due to rising unaffordability and higher interest rates, which have not had the same impact on owner-occupiers or investors, typically older and wealthier. It will be interesting to see if slowing price growth deters or encourages investors.

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While we anticipate the market to slow incrementally, the overall picture is still heavily in favour of sellers until we see listings above 8000-9000 and our 28-day moving average consistently below 0.15%.

Review by Ryan Brierty