Perth's Median House Price up $5,000 For The Week

This week, we will review the latest data and commence a preliminary examination of WA’s economy and the relationship with interstate migration that impacts house price growth.

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Perth’s weekly price growth rebounded after recording a four-month low the previous week. Prices jumped by 0.66%, or more than $5,000 on the median house price. Since we started recording the weekly median price growth in early April this year, the average increase has been more than $3,600, as the orange line demonstrates in the chart below. The chart reminds us how much homeowners pocket each week, which is good news considering the fall in prices between 2015-19. However, the chart also reveals how difficult it is for first-time home buyers. Having your finances approved and watching a home that meets your budget get pushed out of range by $25,000 or more in two months must be very demoralising.

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As the next chart indicates, the median price has increased by $73,000, or more than 10%, since the beginning of April to more than $771,000 this week. We now project a median house price of more than $850,000 by the year’s end, representing a $146,000, or nearly 21%, increase over nine months.

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The dynamic of stable demand and falling listings has been the primary driver of prices over the past 18 months. The next chart shows that listings and sales experienced two years of stability between January 2021 and January 2023. However, following January 2023, listings decreased sharply from approximately 8,000 to just over 3,000, while sales have remained consistently in the 800-1000 range since the beginning of the pandemic in mid-2020.

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So the obvious question is, what caused the number of listings to fall so rapidly, yet sales remain consistent despite the declining options for buyers? The primary reason was the number of new dwellings constructed was well below the required number to meet the increased demand due to migration. With higher construction costs and long wait times for home completion, established properties were far more appealing, and the extra demand eroded the supply.

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However, over the past few months, signs have emerged that the trend of falling listings may have plateaued. REIWA’s data shows that listings, while still woefully undersupplied, have remained reasonably consistent since early June. The following chart suggests that after a period of declining listings and steady demand, the gap between sales and listings may have stabilised over the last six weeks.

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Logically, Perth’s property boom will face headwinds at some stage due to WA’s fluctuating economy and the undersupply/overdemand of housing returning to long-run equilibrium. But, we don’t yet know the effect of the federal government’s reduction to overseas migration on the property market, nor what a fall in commodity prices will have on the WA economy.

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What we do know historically is that there is a strong correlation between the mining resources sector, the WA economy, interstate migration, and property prices. WA’s chart below clearly illustrates the impact of the mining boom from 2011 to 2013 on SFD, which resulted in increased interstate migration, primarily due to employment options, which increased the demand for housing, pushing prices upwards. What is most interesting about the chart, however, is the high levels of interstate migration since the pandemic, even though economic growth has been relatively low.

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Review by Ryan Brierty .