Perth's property market is set for another significant surge, with new analysis predicting home values will climb between seven and ten per cent next year. The latest forecast from REA Group, released on Monday, points to a persistent and severe shortage of available homes as the primary engine for continued price growth.
Supply Crisis Fuels Unrelenting Market Growth
The PropTrack Market Outlook Report for May 2024 highlights a critical imbalance that shows no signs of easing. Buyer demand continues to dramatically outstrip the number of properties listed for sale, creating intense competition and upward pressure on prices. This trend has already propelled Perth to become the nation's strongest capital city market over the past year.
PropTrack's director of economic research, Cameron Kusher, explained that while interest rates remain a concern, the fundamental lack of supply is the overriding market force. "Listings are incredibly low, buyer demand is strong, and population growth is robust," Mr Kusher stated. He emphasised that these conditions are likely to sustain growth even if the Reserve Bank decides to adjust the cash rate later in the year.
Current Market Performance and National Context
The forecast follows an exceptionally strong period for Western Australia's capital. Perth home prices have soared by 20.4 per cent in the past twelve months alone, according to PropTrack data. This remarkable increase solidifies Perth's position as the fastest-growing capital city market in Australia over that period.
In a national context, the report anticipates price growth across most capital cities in 2025, albeit at a more moderate pace than currently seen. However, Perth's projected increase of 7 to 10 per cent for 2026 suggests its market momentum will remain well above the expected national average. The ongoing supply shortage is considered more acute in Perth compared to eastern states, setting the stage for its outperformance.
Construction Lag and Investor Activity
A key factor behind the shortage is the slow pace of new home construction. Building approvals have not kept up with the rapid growth in population driven by interstate and overseas migration. This lag means the supply of new homes will remain constrained for the foreseeable future.
Additionally, the report notes a shift in buyer composition. Investor activity in Perth's market is rising, now accounting for approximately 28 per cent of new loan commitments. This increase indicates growing confidence in the long-term returns from Western Australian property, which further tightens competition for available stock, particularly for entry-level homes.
Implications for Buyers and Sellers
For prospective buyers, the forecast signals another challenging year of competitive market conditions and rising prices. The window for entering the market at lower price points appears to be closing further. For sellers, the persistent demand creates a favourable environment, though it also presents challenges when trying to purchase their next home in the same heated market.
The REA Group's analysis concludes that without a substantial and unexpected increase in the number of homes being built or listed for sale, the powerful dynamics of low supply and high demand will continue to define Perth's property landscape well into 2026.
