Yahoo Finance Shock $100,000 win in Aussie city set to join million-dollar club: 'Crazy'
Buyer's agent Ryan Lobik explained the multiple factors affecting prices in the WA capital.
Perth property is absolutely booming at the moment and there are several factors creating a "perfect storm" for the market. Recent CoreLogic data recently found the top 10 best-performing suburbs in the whole country in 2023 all came from Greater Perth.
Homes in areas like Kwinana, Armadale and Gosnells increased in price by more than 30 per cent in just 12 months. Cohen Handler buyer's agent Ryan Lobik told Yahoo Finance there are some projections that could see Perth's median house price go from its current $660,000 to more than $1 million.
"There are so few properties in some of these suburbs now," he said. "Two years ago, you'd have five properties in a suburb with 10 active buyers for it. So you'd have two buyers per property.
"Now you've probably got 20 buyers on one property. So, when a property comes up, the demand on it is just crazy, out of control."
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Lobik gave an example of two properties listed in the same suburb recently. One sold for $2.015 million and the other sold six weeks later for $2.135.
The buyer's agent said the client who bought the first property was stunned.
"He couldn't believe it," Lobik recalled. "He's like, 'I just pocketed 100 grand equity for nothing'."
What's behind the huge price increases?
Lobik said it's a combination of migration from overseas and interstate, big state government projects, a lack of housing supply, the rising cost of construction, and increasing rental prices coalescing to push Perth property to record highs.
He described it as a "domino effect" where one aspect affects the other and they all increase.
"The new builds are well short of what's needed, so demand is huge," he explained to Yahoo Finance.
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"Rent is increasing as a result of the scarcity of property. So rents are going up, and then as rents go up, renters want to get out of their rental and go, 'Well, for what I'm paying in rent, I might as well go and buy'."
He said local buyers have just started jumping on the bandwagon and are now fiercely competing with property investors.
According to the Real Estate Institute of Western Australia, the median house price sits at $660,000 and the average rent is $650 per week.
If you bought a house at that median price and stumped up a 20 per cent deposit, the weekly repayments are only $750 per week based on a 5.87 per cent interest rate mortgage lasting 30 years.
Has Perth hit its peak?
This is the question many investors are asking as they toss up whether to put their hard-earned cash into the WA capital.
Lobik said the city has a lot more legroom for prices to grow.
"In terms of the runway for the future, talk about hitting a peak or not hitting a peak, ultimately, the runway that we have is still quite lengthy," he said.
"I think affordability is the main one at the moment because we've got still so much room to move in terms of spend."
He said some properties are only on the market for a few days before a buyer snaps it up, highlighting how the market is still very much hot.
What could cause properties in Perth to increase?
The buyer's agent told Yahoo Finance it would all come down to affordability for the future of Perth's property prices. He said the moment wannabe buyers feel the market is too expensive you'll see the demand cool down.
"Once we get to sort of Sydney levels of 60 per cent of your income going into mortgage, then that's going to be a natural handbrake," he said.
While there aren't any major predictions for an interest rate cut in 2024, Lobik said if the banks are right and the Reserve Bank of Australia reduces rates next year, it will be "nuts" for Perth.
"Perth doesn't really need an interest rate cut at this point, because it could just further enhance [buyer] confidence," he said.
Top 10 suburbs in Australia
According to CoreLogic's latest Home Value Index (HVI), the top 10 regions across the capital cities that recorded the biggest price increases last year were all in Greater Perth. They were:
Kwinana - $618,925, up 33.2 per cent
Armadale - $678,832, up 32.3 per cent
Gosnells - $677,844, up 30.4 per cent
Rockingham - $698,767, 28.4 per cent
Mandurah - $671,834, 27.8 per cent
Canning - $847,807, 27.8 per cent
Cockburn - $814,853, 27.6 per cent
Swan - $684,616 - 27.2 per cent
Wanneroo - $719,832, 27.0 per cent
Serpentine - Jarrahdale - $700,548 - 26 per cent
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