Perth property prices will lead the nation until 2026, economist forecasts

Perth is set to remain Australia’s top-performing capital city for price growth according to property industry analyst and economic forecaster, Oxford Economics Australia.

The company’s Residential Property Prospects report released on Monday said with the lowest median house price of all the major capital cities, the WA capital had been able to maintain a considerable affordability advantage over its peers.

There’s no sign of Perth’s house price growth slowing in the near term.

Oxford Economics Australia senior economist and report author Maree Kilroy said near term, fundamentals are geared to place upward pressure on Perth property prices.

“Western Australia continues to record nation-leading population growth (+3.1 per cent for FY2023), while the state’s unemployment rate remains low,” she said.

“Acute capacity constraints persist, driving delays in new home completions which, alongside construction cost blowouts and strong rental growth, are pushing owner-occupier demand towards the established dwelling stock.

“Total advertised listings have trended lower over 2023 alongside above-average purchasing activity.”

In a positive sign for the residential construction industry, 4600 homes were completed in WA for the September 2023 quarter according to building activity data released by the Australian Bureau of Statistics on Wednesday.

Housing Industry Association WA executive director Michael McGowan said it was a 35 per cent increase on the previous quarter and the strongest number of completions since 2017.

However, there remained nearly 20,000 detached homes under construction in WA.

“This data is the first real sign that we are beginning to make inroads into what we know have been significant challenges over the last three years for the housing industry,” he said.

“We are by no means out of the woods, but we are confident these numbers will continue to be repeated over the next 12 to 18 months and help reduce the significant backlog of homes under construction.”

But the continuing surge in international and interstate migration, that has already contributed to a statewide housing crisis, would propel the median house price in Perth to grow by more than 10 per cent in 2024 as the city developed a more sizeable dwelling stock deficiency, said Kilroy.

She predicted the house price growth would slow to a solid 9.8 per cent in 2025.

However, she warned the that the Perth property market had shown a propensity for significant swings in price cycles.

The company forecasts muted home price growth of 2.7 per cent nationally in 2024, with the median all-dwelling price forecast to grow an average of 6.3 per cent over the next two years.