24 Jan Perth’s Property Market: Housing Shortages, Rental Pressures, and Investment Opportunities
Perth’s property market is currently navigating a complex landscape defined by housing shortages, record-low unemployment, and strong investor demand. These conditions are driving both house prices and rents higher while creating challenges for buyers, tenants, and developers alike. Understanding the dynamics of Perth’s market is essential for investors and industry professionals seeking insights into the opportunities and risks that define the region.
Record-Low Unemployment and Workforce Pressures
Western Australia is experiencing historically low unemployment levels, with the number of job vacancies equivalent to just over 10 percent of those not currently in the labour force. This tight labour market reflects strong economic growth but also presents challenges for sectors dependent on skilled labour, particularly housing construction.
The shortage of workers has implications for the housing market. A limited supply of skilled tradespeople slows new home construction, exacerbating the existing housing shortfall. Policies and programs designed to attract and train skilled labour in the construction and property sectors will be critical to addressing these pressures and supporting ongoing development.
Housing Shortage Crisis
Perth faces a critical housing shortfall, with estimates suggesting that between 22,000 and 85,000 additional homes will be required in the coming years. Current construction rates are insufficient to meet this demand, and without a significant acceleration in housing development, both buyers and renters will continue to compete for a limited pool of properties.
The housing shortage is already influencing the market in several ways:
- Rising House Prices: Median house prices in Perth are projected to reach between $704,000 and $718,000 by the end of the 2023–24 financial year, reflecting ongoing strong demand and limited supply.
- Steady Market with Strong Underlying Demand: While house prices remained relatively stable during the first half of 2023, underlying demand has not diminished. Buyers continue to seek properties in key growth areas, sustaining pressure on the market.
- Investor Interest: Affordability, high rental yields, and potential for capital growth have made Perth increasingly attractive to investors, particularly those from the east coast. Investor enquiries surged by 108 percent in 2022, highlighting the city’s growing appeal as a property investment destination.
The Rental Crisis
The rental market in Perth is under significant strain, with vacancy rates falling to 0.6 percent in December 2023. This is far below the balanced market range of 2.5 to 3.5 percent and indicates a severe shortage of available rental properties. Competition for rental housing is intense, particularly for homes listed at $450 per week or less, which are now in extremely limited supply in many suburbs.
The rental crisis has several key implications:
- Rising Rental Costs: With limited supply, rental prices continue to climb, placing pressure on tenants and contributing to affordability challenges.
- High Investor Demand: Tight rental conditions attract investors seeking reliable rental income, further reducing the availability of rental stock.
- Impact on Workforce Mobility: Workers relocating to Perth for employment opportunities face difficulties securing rental accommodation, potentially affecting labour market participation in high-demand sectors.
Solutions to the Housing Shortage
Addressing Perth’s housing shortage requires a multi-faceted approach involving government, developers, and financial institutions. Potential strategies include:
- Accelerated Housing Construction: Increasing the pace of homebuilding is essential to meet projected demand. Incentives for developers and streamlined planning approvals can help boost the delivery of new homes.
- Skilled Workforce Development: Policies designed to attract and retain skilled tradespeople are critical. Apprenticeships, training programs, and targeted immigration initiatives can help fill labour gaps in construction and related industries.
- Innovative Housing Policies: Public-private partnerships, land release strategies, and supportive planning frameworks can improve housing supply and affordability.
- Investment in Rental Supply: Encouraging investment in rental properties, particularly in high-demand suburbs, can help alleviate pressures on the rental market while providing opportunities for investors to achieve attractive yields.
Investment Implications
Perth’s property market presents multiple opportunities for investors, although careful planning and strategy are required:
- Strong Rental Yields: Low vacancy rates and rising rents provide the potential for strong rental income, particularly for units, townhouses, and houses in well-located suburbs.
- Capital Growth Potential: The ongoing housing shortage supports sustained price growth, making properties in growth corridors or emerging suburbs attractive for long-term capital appreciation.
- Affordability Relative to East Coast Cities: Perth remains more affordable than Sydney, Melbourne, and Brisbane, attracting both local and interstate buyers and investors.
- Diversification Opportunities: A combination of rental-focused properties and long-term growth assets can provide a balanced investment strategy. Units and townhouses offer entry-level investment options with strong rental potential, while houses in established areas provide stability and potential for appreciation.
Strategic Considerations for Market Participants
Several factors should be considered when navigating Perth’s property market:
- Location and Accessibility: Properties close to employment hubs, transport networks, and amenities are likely to remain in high demand.
- Supply and Demand Dynamics: Ongoing monitoring of construction rates, land releases, and new developments is critical for assessing market conditions.
- Government Policy and Incentives: Understanding policy changes related to housing construction, workforce development, and investment incentives is essential for making informed decisions.
- Market Timing and Flexibility: Economic conditions, interest rate movements, and population growth can influence market trends, making flexibility and long-term planning vital.
Looking Ahead: Perth’s Property Market Outlook
The Perth property market is expected to remain active in the coming years, driven by a combination of high demand, constrained supply, and increasing investor interest. Key factors to monitor include:
- Housing Construction Rates: The pace of new homebuilding will influence price growth and rental market conditions.
- Rental Market Trends: Vacancy rates, rent increases, and tenant demand will continue to shape investor opportunities and affordability.
- Population Growth and Migration: Workforce movements and interstate migration will support housing demand and influence market dynamics.
- Investor Activity: East coast and local investors will continue to play a role in shaping price trajectories and rental yields.
With careful planning, strategic investment, and supportive policy frameworks, Perth’s property market offers opportunities for buyers, investors, and developers, despite ongoing challenges related to supply and affordability.
Conclusion
Perth is currently experiencing one of the most competitive property markets in Australia. Record-low unemployment, a severe housing shortage, and rising rental pressures are shaping the landscape, creating challenges and opportunities across the market.
For investors, the combination of strong rental yields, capital growth potential, and affordability relative to east coast capitals presents a compelling opportunity. For policymakers and developers, addressing supply constraints and supporting skilled workforce participation is essential to stabilise the market and improve access for buyers and tenants.
Property Finance Invest continues to monitor market trends, including price growth, rental pressures, supply constraints, and demographic changes, to provide insights that support informed decision-making in Perth’s evolving property market.