Perth has been known for its affordable housing market and a strong economy, making it an attractive destination for property investors. However, the question remains: is buying a house in Perth a good investment?
Perth’s property market has seen median house prices reach new highs at the end of the 2022-23 financial year, rising to $555,000. However, Real Estate Institute of Western Australia (REIWA), report a median house price of $575,00 for Perth, placing it competitively amongst the Australian capital cities, though not the lowest.
With the market’s stability and growth potential, investors find Perth an appealing choice, especially given the conflicting predictions on future price trends.
While the market is showing growth, it is essential to understand the intricacies of the Perth property market before making any investment decisions. This article will explore the factors that make buying a house in Perth a good investment, as well as the potential risks involved.
Understanding the Perth Property Market
Current State of Perth’s Property Market
The Perth property market is resilient, driven by population growth and low vacancy rates in 2023. According to REIWA, Perth’s median house price for different bedroom types as of October 2023 is as follows: $540,000 for 2 bedrooms, $510,000 for 3 bedrooms, and $635,000 for 4 bedrooms.
Those considering moving to Perth might wonder, how much does a house cost in Perth?, and these median values provide some insight.
Perth’s median values remain lower than other capital cities, which addresses the question are houses expensive in Perth Australia? and highlights the relatively affordable price points compared to other cities.
Additionally, the median unit price is $400,000 for 1 bedroom, $390,000 for 2 bedrooms, and $515,000 for 3 bedrooms.
CoreLogic data indicates that Perth’s housing market has been on an upward trend, with strong growth in recent months culminating in a new record high for property values as of April 2023.
In contrast, Sydney has seen a modest rise of 0.3% in dwelling values, contributing to a national deceleration in the decline of property values.
Melbourne’s property market has shown stability, with housing values currently sitting just 0.03% higher than March 2020 levels, suggesting a relative steadiness rather than a decline.
Key Players in the Perth Market
Investor interest in Perth’s property market is significant, with high rental yields in suburbs like Banksia Grove, Westminster, and Marangaroo. The Property Tribune also notes Duncraig as a suburb with solid investment potential, marking a shift from the previously popular Scarborough and Yokine
Real estate agents play a crucial role in the Perth property market, helping buyers and sellers navigate the intricacies of the buying and selling process. Buyers agents who have a deep understanding of the local market can provide investors with valuable insights.
They will be familiar with the different neighborhoods, property types, and investment hotspots, allowing investors to make informed decisions based on their specific investment goals.
Comparative Analysis: Perth vs Sydney and Melbourne
In comparison to Sydney and Melbourne, Perth remains more affordable. The latest figures show Sydney’s median house price at $1,578,099 and Melbourne’s at $1,032,266, which are significantly higher than Perth’s.
While Perth’s median property values are significantly lower than those in Sydney and Melbourne, the city still offers good opportunities for property investment. Perth’s property market is driven by population growth and low vacancy rates, which are expected to continue in the coming years.
This, combined with relatively affordable property prices, makes Perth an attractive option for investors looking for good rental yields and long-term capital growth.
In conclusion, while the Perth property market is not without its challenges, it is still a good investment option for those looking to invest in property.
With a mix of local and international investors and owner-occupiers, a resilient market driven by population growth and low vacancy rates, and relatively affordable property prices, Perth offers good opportunities for property investment.
Investment Opportunities in Perth
Perth is a city with many investment opportunities for those looking to buy property. With its affordable housing market and high rental yields, it is an attractive option for both residential and commercial investors.
In this section, we will explore the top suburbs for investment and the advantages of investing in residential versus commercial properties.
Top Suburbs for Investment
Perth has many suburbs that are considered hotspots for real estate investment. Some of the best suburbs in Perth to invest in include:
- Joondalup
- Orelia
- Armadale
- Wellard
- Ellenbrook
- Brabham
These suburbs offer affordable housing options and have a high demand for real estate, making them ideal for investors looking to make a profit.
Action Step: Check out real estate property in Perth.
For those looking to invest in the CBD, Forrestfield is a popular choice. With its proximity to the airport and the city, it is a prime location for commercial properties. The demand for rental properties in this area is high, making it a great investment opportunity for those looking to buy units or commercial properties.
Investment in Residential vs Commercial Properties
Investing in residential and commercial properties both have their advantages and disadvantages. Residential properties offer a steady income stream through rental payments, while commercial properties offer higher rental yields but also require more maintenance and management.
Residential properties are a popular choice for first-time investors as they are less risky and require less upfront capital. Perth’s housing market is currently experiencing high rental yields and low vacancies, making it an attractive option for those looking to invest in residential properties.
On the other hand, commercial properties offer higher rental yields and longer leases, making them a more stable investment option. However, they also require more management and maintenance, making them a more complex investment option.
In conclusion, Perth offers many investment opportunities for those looking to buy property. Whether you choose to invest in residential or commercial properties, it’s important to do your research and choose a suburb that offers high rental yields and has a high demand for real estate.
Financial Aspects of Property Investment
When it comes to property investment, there are several financial aspects to consider. Understanding rental yields is crucial, and investors can check out the current houses for sale in Perth to start their search for a profitable investment.
Understanding Rental Yields
Rental yields in Perth are particularly strong, with the Real Estate Institute of Western Australia (REIWA) reporting yields of 6.7% for houses in certain suburbs and up to 9.7% for units in suburbs like Bayswater, outperforming the previously stated average yields.
Investors should note that rental yields can vary depending on the location, property type, and condition. For instance, properties in high-demand areas such as the CBD and coastal suburbs tend to have higher rental yields.
Additionally, properties in good condition and with amenities such as parking, outdoor spaces, and security features can command higher rental yields.
Impact of Interest Rates and Stamp Duty
Interest rates and stamp duty are two critical factors that can impact the affordability of property investment. Low-interest rates can make it easier for investors to secure home loans and reduce the cost of borrowing.
On the other hand, high-interest rates can make it difficult for investors to service their home loans, leading to financial strain.
Stamp duty is a tax levied on property purchases, and the amount varies depending on the property’s value and location. In Western Australia, the stamp duty rate ranges from 1.9% to 5.15% of the purchase price according to the WA government.
Investors should factor in the stamp duty costs when calculating their deposit amount and home loan repayment.
Decoding the Affordability Factor
Affordability is a pivotal factor to consider when investing in property. It is essential to assess one’s financial situation and eligibility for home loans before embarking on the property investment journey. Investors should calculate their deposit amount, home loan repayment, and other expenses such as maintenance costs, council rates, and insurance.
Perth’s property market has experienced steady price growth over the years, with an average annual growth rate of 3.1% for houses and 2.7% for units according to REIWA.
However, rental growth has been relatively slow, with an average rental yield of 4.3% for houses and 4.9% for units. Investors should consider the rental growth potential when assessing the affordability factor.
Growth Drivers and Future Prospects
When considering whether buying a house in Perth is a good investment, it is important to examine the growth drivers and future prospects of the area. Perth’s property market has been through a downturn in the past, but there are signs of recovery and growth in the coming years.
Infrastructure and Amenities
One of the main growth drivers in Perth is the development of major new infrastructure, such as the planned Metronet train line and upgrades to the transport interchange.
These projects will improve public transport and make it easier for residents to get around the city. Additionally, the city has a strong retail-commercial centre, with a variety of shops and services available.
Perth also boasts a range of recreational and educational amenities, with a focus on seaside locations and outdoor activities. This makes it an attractive location for families and individuals who enjoy an active lifestyle.
The city’s amenities nucleus is expected to continue to grow, with more investment in recreational and educational facilities planned for the coming years.
Economic and Population Growth
Perth’s economy is expected to continue to grow in the coming years, with a focus on industrial-commercial employment zones. This will create new job opportunities and attract businesses to the area. Additionally, the city’s population is expected to continue to grow, with rising demand for rental properties and increasing unit prices.
“Perth stands out for its rental demand and capital growth potential, highlighting its low vacancy rate and high yields, which strengthen its position as an attractive location for property investments.”
Sales activity in Perth has been consistent, and projections from sources like SQM Research suggest that the housing market is set for moderate growth, estimating house price increases of 2% to 30% from 2023 to 202
In terms of upfront costs and monthly repayments, Perth is one of the more affordable capital cities in Australia. This makes it an attractive option for first-time buyers and investors looking to enter the property market.
Overall, Perth’s growth drivers and future prospects suggest that buying a house in the city could be a good investment. With a range of infrastructure and amenities, a growing economy and population, and strong sales activity, the city is well-positioned for future growth.
Suggested reading: We’ve got more for you! Expand your understanding by reading our extensive article on buying a house in Perth, your go-to resource for making an informed purchase.
FAQs on ‘Is Buying a House in Perth a Good Investment?’
What is the property market forecast for Perth in 2024?
The West reports a forecast by KPMG which predicts an 8.4 per cent increase in local house prices for the financial year, potentially raising the median house price from $638,000 to approximately $690,000 by June 2024.
Is Perth going to boom?
Ironfish explains that Perth is on the cusp of another boom, similar to the one where house prices tripled in six years. With a predicted population increase of 200,000, the city is seen as ripe for investors, creating a ‘perfect storm’ for growth.
Will Perth become a big city?
According to The City of Perth, the population of Greater Perth is expected to grow from just over two million to 2.9 million by 2031 and to 3.5 million by 2050. This growth will make Perth the third-largest city in Australia, after Sydney and Melbourne.
How bad is the rental crisis in Perth?
The West highlights a significant rental crisis in Perth, with over 300 tenants competing for a single rental property as the vacancy rate continues to tighten, and conditions are expected to worsen.
