Published
February 8, 2024
Australia’s property market dynamics have experienced a significant shift in recent times, with Perth emerging as the most in demand capital city. This transformation has far-reaching implications, particularly for residential property developers looking to capitalise on the burgeoning opportunities in Western Australia.
As we delve into the details, it becomes evident that understanding the current state of Perth’s property market is crucial for those aiming to navigate this thriving landscape.
Perth has overtaken its east coast counterparts, to claim the title of Australia’s hottest capital city property market. The city’s property market has seen a surge in demand and rising property prices, challenging the traditional dominance of the east coast in the real estate sector. This shift marks a turning point and opens new avenues for residential property development in Perth.
Oxford Economics Australia released The Residential Property Prospects report in January, which predicts house prices in Perth will rise in 2024 by 9.3%, driven by the city’s relative affordability, strong economy and shortage of housing supply.
Western Australia’s rapid population growth and low unemployment rate will boost demand for housing in Perth, the report found, while construction bottlenecks will push buyers towards established houses, which remain in short supply.
Alongside Perth, Adelaide and Brisbane are expected to remain the strongest performing markets in the country.
With a vacancy rate of only 0.4%, Perth also has the tightest capital city rental market in the country, according to SQM Research. Skyrocketing rents, low vacancy rates and an unprecedented demand for homelessness services were caused by a chronic shortage of affordable housing supply.
At the first Property & Development Roadshow – Unpacking Housing, Development and Planning Challenges & Opportunities in the South West in collaboration with REIWA and Property Council WA last year, UDIA WA CEO Tanya Steinbeck said there was clear evidence to suggest a shortfall of approximately 20,000 dwellings statewide between 2023-2026.
“Based on projected household formation compared with annual dwelling supply, there is a cumulative shortfall of around 20,000 dwellings statewide over the next three years,” Ms Steinbeck said.
“While Perth will bear the brunt of that shortfall, the regions are not immune with around 5,000 of those dwellings needed in the regions. If we don’t find a way to get more stock into the development ready pipeline and out to market, the housing crisis is only set to deepen.”
Implications for Residential Property Development
The surge in demand for residential property development in Perth can have several implications, both positive and negative, for various stakeholders in the real estate and construction industries. Here are some potential implications:
Increased Demand and Opportunities
The rise of Perth as Australia’s hottest property market brings forth a surge in demand for residential properties. This increased demand creates lucrative opportunities for property developers to capitalise on the growing appetite for housing in the region.
Whether it’s high-rise apartments, suburban developments, or waterfront properties, the diversity in demand allows developers to explore various niches within the market.
Increased Property Prices
Higher demand often leads to an increase in property prices. As more people compete for limited housing, prices may rise, making it potentially more profitable for developers. In January alone, it rose by 1.6%.
Booming Construction Industry
A surge in demand typically translates to increased construction activity. This can boost the construction industry, create jobs, and stimulate economic growth in the region.
Infrastructure and Urban Planning
The increase in demand may put pressure on existing infrastructure. Local authorities and developers may need to collaborate to ensure that the necessary infrastructure, such as transportation, utilities, and public services, can support the growing population.
Government Regulations
Government bodies may need to adapt regulations to manage the increased development activity. This could involve zoning changes, building codes, or other policies to maintain a balance between supply and demand.
Affordability Concerns
Rising property prices can lead to concerns about housing affordability for residents. Policymakers and developers may need to consider measures to address this issue, such as affordable housing initiatives or further incentives for first-time homebuyers. Two such schemes are currently in play that aim to aid purchasers looking to get into the market.
In October 2023 the WA Government announced that the off-the-plan duty concession and rebate scheme was extended to 30 June 2025 for pre-construction contracts, applying retrospectively to eligible contracts signed prior to the date of announcement that have not yet been paid a rebate.
The scheme aims to make home ownership more accessible to Western Australians and encourage employment in the construction industry by providing a duty concession or a rebate of duty paid on eligible apartment purchases.
Far East Consortium’s Perth Hub is eligible for the off-the-plan duty concession scheme, providing significant savings on stamp duty for qualifying purchases.
Perth Hub purchasers can benefit from an upfront concession if they:
- Enter into an under construction contract between August 31, 2023, and June 30, 2025, to purchase a new residential unit or apartment off-the-plan.
Given Perth Hub is currently under construction, this means purchasers can save up to $50,000 on stamp duty.
Additionally, the first home owner grant (FHOG) is a one-off payment of up to $10,000 for eligible applications from people buying or building their first new home. There are no income or assets tests to qualify for the FHOG.
The FHOG is available for the purchase of a new home or a home that has undergone substantial renovations. The FHOG isn’t available for established homes.
You can learn more about FHOG here.
Impact on Existing Residents
The surge in demand may affect the quality of life for existing residents. Increased traffic, noise, and changes to the neighbourhood character are common concerns that need to be addressed through thoughtful urban planning.
Opportunities for Investors
A booming property market can present opportunities for real estate investors. However, as is the case in any market, investors should conduct their own thorough market research and due diligence to make informed decisions when adding to their portfolio.
Challenges and Considerations
While the opportunities are abundant, residential property developers entering the Perth market must navigate challenges unique to the region. Factors such as land availability, regulatory considerations, and competition within the market require careful consideration. Understanding the local landscape and consumer preferences is essential to overcoming these challenges and ensuring the success of residential projects in Perth.
What Is Next for the Perth Property Market?
Predictions for the Future
Looking ahead, experts predict continued growth and stability in Perth’s property market. The city’s appeal is expected to endure, attracting more investors and residents seeking a high-quality lifestyle. For residential property developers, this presents a long-term opportunity to establish a strong presence in a market poised for sustained growth.
Long-Term Effects on the Australian Property Market
Perth’s ascent as the hottest capital city property market is not only a localised phenomenon but also has implications for the broader Australian property market. The city’s success may influence investor perceptions, potentially redistributing investment focus from the traditional East Coast markets to the burgeoning opportunities in Western Australia.
Final Word
Perth’s rise as Australia’s hottest capital city property market marks a pivotal moment in the country’s real estate landscape. The implications for residential property development are vast, with increased demand, economic benefits, and social impacts shaping the industry’s future in the region.
With a proven track record of successful residential developments across Australia, FEC brings a wealth of experience and capabilities to ride the waves of change in the property market. Having successfully delivered The Towers and The Ritz-Carlton, Elizabeth Quay, and being on track to complete Perth Hub this year, FEC is capable of maximising the potential presented by Australia’s hottest capital city property market.
In a further commitment to FEC’s dedication to the Perth market, FEC Constructions was established to deliver Perth Hub. FEC Constructions is a wholly owned subsidiary of the Far East Consortium group. Proudly partnering with industry leading subcontractors and suppliers, FEC Constructions is a natural expansion of Far East Consortium’s international construction capability and delivery know-how.
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