The only way was up in 2024 for Perth’s property market, despite sky-high interest rates hurting mortgage holders and bringing house prices down over east.
Perth’s market exceeded many forecast predictions, recording a rise of more than 20 per cent off the back of record migration, an embattled construction industry, relentless inflationary pressures and a chronic undersupply of housing. Since 2019, Perth house prices have risen from a median of $484,788 to hit a record high of $882,075.
Residential Property: Strong Demand with Rising Prices
The Perth residential property market has seen a significant rebound since 2020, following a period of stagnation in the late 2010s. In 2025, this upward trend is expected to continue, driven by increasing demand for both new and established homes. There are several key reasons behind this positive outlook:
- Population Growth: Western Australia’s population is growing steadily, aided by interstate migration from other states as well as international immigration. Perth is becoming an increasingly attractive destination due to its affordable lifestyle and relatively lower cost of living compared to Sydney and Melbourne. Population growth is a key driver of housing demand, particularly in the suburbs and outer areas of Perth.
- Low Interest Rates: While interest rates are expected to gradually rise in the coming years, the Reserve Bank of Australia (RBA) has maintained historically low rates for some time. While this makes borrowing more accessible, it’s expected that the low rates will continue to support demand for property in 2025, particularly among first-time homebuyers and investors.
- Limited Supply of Land: Perth’s inner suburbs have limited available land for new development, especially as urban sprawl is being restricted in favour of more sustainable growth. This limitation, combined with high demand, is expected to contribute to price increases, particularly for properties close to the city centre or near transport hubs.
Commercial Property: Mixed Performance
The commercial property market in Perth, particularly office space and retail, has faced challenges in recent years, partly due to the COVID-19 pandemic and the increasing shift towards remote work. However, there are signs of recovery as businesses adjust to the new normal and demand for office space starts to stabilise. Perth’s commercial property market in 2025 is likely to experience a mixed performance:
- Office Space: With businesses adjusting to hybrid and flexible work models, demand for traditional office space in Perth may remain subdued in the short term. However, there is likely to be demand for modern, flexible office spaces, particularly in the CBD and other key business districts, as companies seek to reconfigure their office environments to support new ways of working.
- Retail: The retail sector, especially bricks-and-mortar stores, has been under pressure due to the rise of online shopping. However, Perth’s retail property market may see some growth in 2025, as consumer confidence returns and more people return to physical stores. Local shopping precincts and suburban retail areas could see renewed interest as foot traffic rebounds.
- Industrial and Logistics: The industrial sector, particularly warehousing and logistics, has been one of the strongest performers in Perth in recent years. This trend is expected to continue, as demand for storage space and distribution hubs rises, fueled by the growth of e-commerce and Perth’s position as a key trading hub in Western Australia.
Key Drivers to Watch in 2025
Several key factors will influence Perth’s property market in 2025. Investors, buyers, and sellers should keep an eye on the following:
- Interest Rate Movements: While interest rates are expected to remain relatively low for the time being, the RBA’s decisions regarding rate hikes will play a crucial role in shaping the affordability of borrowing. Even a small increase could have a significant impact on property prices and market sentiment.
- Infrastructure Projects: Major infrastructure projects in Perth, such as the METRONET rail expansion and the development of new residential communities, will drive demand for housing and property investments in certain areas. These projects are expected to boost accessibility, improve urban amenities, and stimulate economic growth.
- Government Policy: Both state and federal government policies will play an important role in the property market. Any changes to housing affordability schemes, taxation (such as capital gains tax), or foreign investment regulations could impact the market.
- Global Economic Factors: Global economic uncertainty, particularly in relation to commodity prices, inflation, and geopolitical tensions, could influence Perth’s economy and property market. Fluctuations in the mining sector, for instance, could directly impact property prices in certain areas of Perth, particularly those linked to resource industries.
Forecast for Perth’s Property Market in 2025
In summary, the Perth property market is expected to see moderate but consistent growth in 2025. Residential property will likely remain in demand due to population growth, low interest rates, and limited land supply, driving price increases. However, there may be challenges for certain sectors, particularly commercial office space, as remote working trends continue.
For investors, Perth presents an opportunity for capital growth, particularly in well-located residential areas and industrial properties. Buyers should remain cautious and consider long-term trends, such as infrastructure developments, before making significant decisions.
As Perth continues its economic recovery and diversification, the property market in 2025 will reflect these shifts, creating a dynamic landscape for all stakeholders. The key to success in the Perth property market will be understanding local conditions, staying informed on policy changes, and adapting to evolving market trends.
Currently, the city is providing reasonable value for properties, but it’s heading toward becoming overvalued. Looking ahead, we’re expecting growth in the range of 10 to 12 percent, but that growth is beginning to enter overvalued territory.
After that, we might experience a flat period. While it may not be a sharp downturn, property values could potentially drop by 10 to 20 percent in real terms over time.
What suburbs will have the strongest growth in coming years?
2025’s theme will be amenity. As interest rates invariably start to drop, homeowners will use this increased serviceability to grapple their way up the amenity ladder using the equity they’ve created over the last few years.
Whilst the lower quartile is not expected to drop in value, the buyer pool will move up the ladder at the expense of those areas that previously offered access and affordability, but not amenity. The ones to watch are Riverton, Willetton, North Beach, Mount Lawley, Wembley, Melville and Mindarie.
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If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.
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