Perth has emerged as Australia's hottest property market fuelled by the nation's strongest population growth, chronic housing shortages, high wages and a buoyant resources-led economy.
House prices have risen 20 per cent to a median of $680,000 over the past year, according to Real Estate Institute of Western Australia (REIWA), which says the average time it takes for a property to sell has plummeted to eight days.
Unit prices, now at $450,000, have also started moving and grew 12.5 per cent over the same period.
Rents, a huge part of Perth's property story, are up 76 per cent for both units and houses since 2020 due to tight vacancy rates now sitting an all-time low of 0.6 per cent.
This has been a catalyst for many former renters to buy homes, which takes more properties out of the rental market, making the situation worse.
Another boom and bust?
So how long can such price rises last in a city and state renowned for booms followed by busts?
Joe White, President of REIWA, believes the heat will come out of the market but says more moderate price growth is sustainable due primarily to the imbalance between demand and supply.
"I think it's got a few more legs left in it," says White. "The two things that always affect the property market are population growth and real wages growth.
"Where we are out of step with the rest of the country is we have both and it is all due to one commodity - iron ore, which basically dictates everything in Western Australia.
"It never goes on forever. If you look back from November 2014 to November 2019 that was the longest property slump in WA property history - 60 months of continual house price decline."
Need for more homes
White says Western Australia is about 60,000 homes short of demand, a situation exacerbated by Australia's highest population growth of 3.3 per cent in the year to December 31 compared with the national average of 2.5 per cent.
Of the 94,000 new residents, 69,000 were international immigrants and 11,000 came from interstate. At this rate, the population of Western Australia will pass 3 million for the first time later this year.
Trent Fleskins, Managing Director of Strategic Property Group, said demand is likely to exceed supply for the foreseeable future.
"We have sustainable population growth over and above long-term averages and our physical capability to actually create housing in Western Australia either through house and land packages or apartments is limited by a number of factors," Fleskens says.
"These include red tape, financial feasibility and most materially a lack of trades people on the ground to do the work. And that's not going to change any time soon.
"Therefore, prices will probably continue to grow at the same rate they've been growing until the point the market can't afford that price anymore.
"And if we see interest rates drop by this time next year that allows a higher propensity for the market to continue to afford the increase in process."
Top places to invest
He says houses have always been the best investment in Perth and that will remain the case.
Looking ahead, he believes the best returns will be in high priced property in better suburbs.
"Right now, there are a lot of properties in the $1.5 million to $3 million space that probably have not seen anywhere near the price growth of the cheaper stuff," says Fleskins.
"The second rates start to drop the buyer pool will start to broaden so there's an opportunity to be buying into that first and second quartile in WA."
What's on the market - high end
A five-bedroom home in Cottesloe, one of Perth's top suburbs, is listed with a guide of high $4 millions.
What's on the market - bargain
Investors are attracted to this low-maintenance unit in Perth on the market, for offers from $360,000.
