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Is Perth a Good Real Estate Investment Opportunity? A Look at Affordability

Is Perth a Good Real Estate Investment Opportunity? A Look at Affordability 

Whether you’re a first-time investor or an expert, affordability is most often at the heart of your investment decisions. The median property prices in an area indicate affordability.

When it comes to Western Australia, Perth is a strong contender in terms of affordability. Although the median housing prices have been low in the area, Perth has experienced a strong cost of renting increase and property value growth.

Do these factors make Perth a good real estate investment opportunity? Let’s find out.

Why Does Affordability Matter?

The upfront cost of buying a property is one of the most important factors that people consider when investing in real estate. After all, no one wants to break the bank just to get their foot in the door.

Moreover, when you buy a property, you are also taking on additional costs such as mortgage payments, property taxes, and fees for maintenance and upkeep. All of these can add up quickly.

By looking at the median property prices, you can get a good idea of how much it will cost to buy a property in that area. That makes it easier to decide whether or not the investment is worth it.

Median Property Prices in Perth

As of December 31, 2022, the median value of property in Perth was $560,902, much lower than Brisbane, Adelaide, Melbourne, and Sydney. It was also quite reasonable compared to the national median dwelling price of $708,613 and that of combined capital cities, sitting at $770,374.

Besides the median prices, it’s also important to note that Perth had one of the lowest downturns in prices of just 1.5%, compared to 8.3% of Sydney and 4.3% of Brisbane.

The beginning of the pandemic brought a dip in property pricing throughout the country. When the situation got better, there was a trough-to-peak growth in all major cities.

Perth experienced a 25.9% growth, which is more than Melbourne at 17.3% and comparable to Sydney at 27.7%. Although Perth’s peak growth wasn’t as high as other capital cities, its decline from the recent peak was the lowest across the board.

Perth only experienced a 0.6% decline, compared to 12.7% in Sydney, 9.4% in Brisbane, 9.3% in Hobart, and 8.3% in Melbourne. July 2022 was the month of the recent peak for Perth’s property values.

The good news is that the asking prices in Perth rose by 1.4% in December 2022, making the region great for real estate investment. The rise indicates increased investor confidence in the city, which is promising for the future of real estate investment.

As of January 2023, the median price of capital city houses was $586,721 in Perth, whereas the median value of units was $406,621. There has been an annual change of 3.9% in house prices and 1.1% in apartment prices.

Amid the global pandemic-led economic crisis, housing values have fallen significantly in the past few years. Sydney had the highest annual value fall of 12.1%, followed by 8.1% in Melbourne. However, three of the Australian capitals experienced an increase in property value, with Adelaide at 10.1%, Darwin at 4.3%, and Perth at 3.6%.

How Does a Low Median Price Encourage Investments in Perth?

Zaki Ameer of DDP Property – Buyers agents in Perth Western Australia says “Low prices provide the opportunity to purchase properties at affordable rates and then renovate or resell them to make a profit. It also encourages more investors to enter the market, as there’s a lower risk associated with investing in properties that have not yet been renovated or refurbished.”

Low median prices also provide a lower barrier of entry for first-time buyers, allowing them to get into the market at an affordable rate. With the Perth City Deal in action, more people are expected to move to Perth due to increased employment, educational, and business opportunities.

These people will require permanent housing or rentals for residence. Investors can benefit from low median prices in the area to purchase properties that can be leased out for regular income.

An Opportunity for Passive Income 

Rents in Perth have increased once again for five times in a row, recording the highest quarterly growth in the past two years. The average weekly rental price grew by 6%, landing at $530 per week, which is the highest increase in Australia’s capitals.

With the return of overseas migration, the trend is expected to continue as more and more people will compete in the already tight market for rental properties.

The rental growth is mainly concentrated in the inner and middle-ring suburbs of Perth, where vacancy rates were already very low even before the pandemic.

First-time investors can also benefit from strata schemes. These typically include apartments, townhouses, or villas in multi-level complexes and are often accompanied by amenities such as swimming pools and parking.

Strata schemes are often attractive to investors due to their potential for higher yields than regular rental properties. They also eliminate the hassle of property maintenance and management.

Which Perth Suburbs Should You Invest In?

Baldivis is one of the most attractive investment suburbs in Perth. It’s located just south of Perth and offers both a convenient commute to the city centre and access to a range of amenities.

Baldivis has seen an 8.5% increase in sales growth in the past year, with the median sales price at $466,000. Meanwhile, there has been a 15.6% or $520 per week rental growth in the suburb.

The time of market for houses is as low as 11 days, and for units is 37 days, which indicates that Baldivis is a suburb in demand.

Another good option is Ellenbrook, where the median sale price is $454,000. Although the sales growth is lower at 5.5%, the rental growth is higher than Baldivis at 19%. 

Regardless of the suburb you select, the house and unit time on the market are very low for Perth, making it an ideal investment choice. Plus, the ever-rising property and rental values mean you’re in for a high return on investment.

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