Perth is now Australia’s most affordable capital city to buy a house
29th July, 2021
For the first time in 28 years, Perth has emerged as the most affordable city in the country to buy a house, a new report has revealed.
Figures from the latest Domain House Price Report, released on Thursday, show Perth house prices have grown 12.3 per cent to $595, 823 during the year to June – their highest level since June 2015.
Unit median prices grew 13.7 per cent to $370,571.
Domain chief of research and economics Nicola Powell said Perth was now considered the most affordable capital to purchase a house because, while prices were continuing to rise, they were not increasing as rapidly as other capital cities.
However, she said, Perth house prices were on track to surpass their 2014 peak early next year.
“I think that in itself is amplifying this sense of urgency among buyers, because while prices still remain below their previous peak, that gives the perception of value in the market to buyers,” she said. “It is probably spurring on decisions to be made quicker.”
Elevated buyer demand was being supported by low interest rates and high levels of household savings, Dr Powell said.
“With interest rates on savings so low, increased spare cash has been diverted into the home and has spurred people to upsize. Perhaps they wouldn’t have done that prior to the pandemic, but that’s bought forward their decision,” she said.
“When you have a look at transactions in greater Perth over the June quarter, it was the busiest June quarter since 2014, based on the number of properties sold. That shows how much the market has jolted back into activity and shows that the demand is strong.”
Property analyst and valuer Gavin Hegney said while low interest rates and high rents were fuelling Perth’s double-digit house price growth, the rise was not as strong as that of Melbourne or Sydney due to several factors.
“Perth has been down since 2014 and the market has got quite a bit of negative equity and twice the mortgage default rates compared to the rest of Australia – of around 3 per cent rather than 1.5 per cent,” he said.
“So the market is very weak [with] a lot of negative equity. So, it doesn’t give people the springboard to be able to upgrade, and to refinance as well.
“Even though we might have the most affordable house prices in Australia I don’t necessarily think we have the most affordable house rents. So … in a lot of instances in Perth, it’s cheaper to buy a property than rent a property for the same amount of money per week.”
Realmark Coastal director Sean Hughes said that, with Perth house prices remaining undervalued compared to other Australian capital cities, he predicted good capital growth moving forward.
“Perth traditionally cycles slightly behind the east coast so the fact that the other cities are tracking ahead of us in terms of house price growth serves as further evidence our next boom is coming,” he said.
Perth’s unit prices fell 1.7 per cent during the June quarter, which Dr Powell attributed to a slight correction in the market, describing the unit market as more volatile.
“I would say units are underperforming compared to houses – [which] are definitely the stronger performer. But even that being said, annually unit prices made the steepest jump in 14 years,” she said.
A rise in the number of homebuyers, more investors and rising rental prices were fuelling unit price growth, Mr Hughes said.
“It’s currently cheaper for people to purchase most properties – in terms of weekly mortgage repayments – than the cost of renting the same home due to historically low interest rates and high leasing fees,” he said.
“So, with many traditional tenants now turning into homebuyers and investors returning to the market due to increased confidence due to an improving market, unit prices are pushing upwards.”
Sourced from Domain