In 2022, the strong WA economy, resources sector and housing affordability helped the Perth residential property market remain more resilient than other states to successive interest rate rises.
Meanwhile, the rental shortage continued to produce significant challenges for many Western Australians.
So, what will the new year bring?
PerthNow Residential asked industry experts to share their thoughts on what to expect in 2023.
REIWA CHIEF EXECUTIVE CATH HART
WHAT IS YOUR OUTLOOK FOR THE ESTABLISHED REAL ESTATE MARKET?
Sales remained strong in Perth in 2022, with the average weekly sales reported by REIWA members sitting at 895 — up just 2.87 per cent from 870 in 2021. We anticipate sales volumes to remain at about this level in 2023.
As building completions increase over the next 12-18 months, we anticipate that listings will start to increase, however, they will remain below historic averages.
The low supply and strong demand will maintain a relatively steady state for WA house prices over the coming 12 months.
Currently, the Perth established home market is weathering interest rate changes well, supported by a strong economy, low unemployment and population growth.
In addition, Perth is also the most affordable capital city in Australia, which has allowed buyers and mortgage holders to absorb interest rate increases so far.
These conditions are largely expected to continue into 2023.
With rate rises continuing into the new year, we are starting to see buyers adjusting their expectations and budgets.
As a result, we anticipate good sales activity to continue in the low-to-mid price brackets in 2023.
Demand for housing in WA is expected to stay relatively strong.
Interest rates remain of concern though, with buyers more cautious and price sensitive due to reduced borrowing capacity.
The rising costs of rents, though, are starting to see some shift to people looking to purchase. We are closely watching what the Reserve Bank of Australia does, but we are cautiously optimistic for 2023.
HOW WILL PERTH’S RENTAL MARKET PERFORM?
For tenants, 2022 was another challenging year. Rental listings remained at near-record lows, the vacancy rate dropped to 0.7 per cent and the median weekly rent was $500 in November, which was $60 higher than a year ago.
After seeing investors leaving the market in the past two years, with more than 18,000 fewer rentals now since the peak in January 2021, we are starting to see increasing investor activity, particularly from eastern states investors.
This is a positive sign in regard to boosting rental stock levels. Rental listings will remain low in the medium term but are expected to improve over the next 12-18 months, as both building completions and investor activity increase.
Positive net migration will maintain demand in the market and we anticipate some further increases to the median rent price in 2023.
REIA PRESIDENT HAYDEN GROVES
WHAT IS YOUR OUTLOOK FOR THE RESIDENTIAL PROPERTY MARKET?
WA’s property market grew at a more subdued rate than other parts of the nation from late 2019, leaving it as the most affordable place to buy residential property around Australia.
With the State’s strong underlying economic fundamentals leading the nation, there is a strong prospect for WA’s market to hold onto its gains despite rising interest rates and high inflation remaining a challenge in 2023.
Completions of new homes will accelerate, which ought to free up trade constraints as the year progresses. This could reveal an increase in home renovations in the established market. Listing levels remain below long-term averages, with only moderate increases in supply expected as the year unfolds.
WILL PERTH’S RENTAL MARKET CONTINUE TO BE CHALLENGED?
Supply of residential property for lease remains well below long-term averages and, with a vacancy rate of around one per cent, subdued investor activity and supply blockages for new stock entering the market, Perth’s rental market is likely to remain tight in 2023.
Rents are likely to remain high and, with relatively low land values compared to east coast markets, Perth rental yields lead the nation.
Investors may finally decide to turn their attention to the west in larger numbers, which ought to contribute to keeping property values strong.
HOW WILL REGIONAL WA PERFORM?
We witnessed substantial gains in home values in the holiday destinations of Broome and the Margaret River region in 2022, while the Busselton region continues to expand and attract buyer demand.
If the Perth market pulls back, then these regions often slow too but, with Perth’s market likely to hold, I’d be surprised to see these markets pull back.
One place to watch will be the Pilbara resource market regions of Port Hedland and Karratha, where mining production — whilst strong at the moment — may diminish as 2023 unfolds.
Other regional areas such as Albany and Esperance have significant supply constraint and solid demand, which should continue to underpin a strong market in those regions this year, especially on the back of exceptional local harvests.
UDIA WA CHIEF EXECUTIVE TANYA STEINBECK
2022 was a challenging year for the property industry, with heightened demand for housing impacted by severe skills and materials shortages.
The housing market boomed across the country and, while prices on the east coast skyrocketed, Perth managed to keep a lid on signifi cant price growth, meaning our market has remained relatively steady.
Moving into 2023, this puts Perth and WA’s housing market in a good position to weather the oncoming storm that is predicted to batter the broader Australian residential market.
Despite ongoing interest rate rises likely until at least mid-2023, and a potential global recession in the works, WA is expected to continue to attract more people to the State and our economy is predicted to remain on a growth trajectory.
That means ongoing demand for new land and housing that will bolster the market in 2023.
New homebuyers should expect an ongoing restriction of product on the market as supply remains constrained in 2023.
However, values are likely to remain steady or could increase slightly, which is good news for those investing in property.
WHAT ARE YOUR HOT SPOT PREDICTIONS?
North-west corridor (Alkimos, Eglinton and Yanchep)
Ongoing growth in this coastal strip attracts a whole range of buyers seeking affordable coastal living, with upgrades to freeway access, a new train station and new activity centres all in the works.
Byford and surrounds
Construction on the Metronet Byford Rail Extension is set to commence this year and, once finished, that connection will allow those in Byford and the wider Serpentine-Jarrahdale catchment access to employment and activity nodes in Armadale and beyond.
Malaga
The State Government’s announcement that WA’s first dedicated screen production facility is set to be built in Malaga has put the spotlight on this burgeoning area that will benefit from a new train station as part of Metronet’s Morley-Ellenbrook Line extension.
Precinct planning is underway for a mix of uses in the area to make it a more vibrant community.
Baldivis
This area just keeps growing and, with a range of facilities and great schools, Baldivis is a magnet for families and first-homebuyers.
Located in the City of Rockingham, it also remains one of the most affordable areas in Perth.
Redcliffe
Another area that has appeared on my list in previous years. It is also another beneficiary of Metronet, with the new Redcliffe station opening last year.
BLACKBURNE MANAGING DIRECTOR PAUL BLACKBURNE
HOW DO YOU THINK THE PERTH APARTMENT MARKET WILL PERFORM IN 2023?
This year will continue to be a strong year for apartments in WA, with the east coast softening.
Interest rate rises will not affect buyers of larger high-end apartments, as they generally don’t borrow to settle.
Their houses are worth 20-30 per cent more than two to three years ago, so they now have more equity to spend and will be able to buy a larger apartment than they could have two to three years ago.
We will see owner-occupier demand for larger high-end apartments continuing, with investors still being a small part of the market.
With rents booming, this has been offset by increases in rates, so net returns to investors after interest rates remain about the same as last year.
With construction prices up, there is no choice but for new off-the-plan releases to be at higher prices unless planning laws change to allow more density on certain sites and/or land prices ease.
We don’t expect construction prices to increase further so, with the market values increasing, we will be able to continue delivering larger high-end apartments at a reasonable price.
Prices in WA are the most affordable in Australia and most experts predict WA will have moderate growth over the year.
Perth prices have gone up steadily in the past few years, rather than with a large boom like we saw in the east coast, meaning we can expect more long-term sustainable growth.
The east coast markets will come back around 10 per cent, however, they went up 30-40 per cent over the past three years, so people have still gained a lot of equity.
WA prices may only go up 2-4 per cent, however, we have seen 20-30 per cent price growth in the past three years so, although the rate of growth will slow, prices will continue to go up.
There is a shortage of larger higher-end apartments in the western suburbs, especially, and we expect this to continue for many years to come.
Prices this year will be higher than last year, as demand outstrips supply and very little construction has started. There is a major apartment shortage coming
WHAT ARE YOUR APARTMENT HOT SPOT PREDICTIONS?
Areas near the beach where there are apartments with views of the ocean or over will continue to be the most sought-after from owner-occupiers wanting to live in the prime suburbs.
The new Karrinyup town centre and shopping centre is a game changer for the area and there is almost no new apartments available for people that want to stay in the area they raised a family.
We also see that apartments in areas like City Beach will have the most growth as, again, there is no supply and huge demand from locals wanting to rightsize.
This does not mean there is strong demand for all projects in the area. They must still be iconic sites with a good value proposition.
WA’s planning system still makes it risky and difficult to get iconic projects approved in prime locations, where the demand from locals is.
FINBAR CHIEF OPERATIONS OFFICER RONALD CHAN
WA’s median house prices still remain the lowest in the country, which will continue to attract interstate and overseas buyers as shown last year.
Coupled with our strong resources sector, low rental vacancies, as well as supply issues, this will ensure WA’s market continues to perform better than the east coast despite any further interest rate rises.
WHAT BUYERS WILL BE ACTIVE?
Downsizers will look to take advantage of the strong property market, with prices of their existing home still in their favour as they shift their lifestyle into quality apartments.
I expect this will be particularly prevalent in premium suburbs, where developments are nearing completion.
WHAT ARE YOUR APARTMENT HOT SPOT PREDICTIONS?
We won’t be seeing as many development launches this year due to rising construction costs as developers hold off until costs stabilise and selling prices increase.
Buyers are not spoilt with choice, which means the few existing developments currently under construction in the market will be soaked up.
ARE THERE ANY GOVERNMENT REGULATIONS YOU WOULD LIKE TO SEE MAINTAINED OR CHANGED IN 2023?
If we are to tackle the supply of apartments in the next couple of years, then the off-the-plan stamp duty rebate, which ends on October 24, should be extended indefinitely to encourage both locals and overseas buyers to invest in our State.
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