Perth has had a record-breaking plummet in house prices and the largest fall of any capital city in the country.
Domain’s House Price Report, released on Thursday, showed Perth prices fell by 7.4 per cent ($88,664) in the September quarter to $1.115 million, marking the largest quarterly decline on record.
House prices have now fallen for two consecutive quarters which is the longest downturn since 2019.
Perth unit prices also declined by 6.5 per cent ($45,487) in the September quarter to $659,561 which was also the largest decline of any capital city and steepest quarterly fall on record.
Domain’s chief of research and economics, Dr Nicola Powell, said the report shows a “sharp turnaround” in pricing conditions across Perth.
“When you think about what we’ve seen over recent years, we have seen really strong rates of price growth, and what occurred over the September quarter was a really strong reversal of that trend,” Powell said.
She says the context of how fast and steep prices rose over the year was a key factor for what caused the steep drop.
“We’ve seen an awful lot of headwinds collide over a short period of time this year. Rate hikes, another one just in September and the prospects of another rate hike, so that’s reduced borrowing capacity,” Powell said.
“We have seen changes to the way we tax investment housing, and that’s given investors jitters, and we’ve had new investor activity pullback.
“We’ve also got cost of living pressures placing additional pressure on Australian households, and I think all of these things together have really switched the dynamics of Perth’s housing market.
“Ultimately, what we have seen is probably demand is now weakening, and overall supply is now rising.”
Property expert Mark Hay said the 7.4 per cent house price fall was “a bit more drastic” than what he was seeing on the ground.
“I think we’re just doing a fundamental correction,” he said.
“My business does everything from $300,000 apartments to $30 million farms and everything in between. So we have a broad cross-section and I think if you look at the statistics, there’s just over 8000 listings on the market today.
“What we call a balanced market is somewhere between 12 and 15,000 listings, and another good statistic is a balanced rental market is somewhere between 3 and 5 per cent vacancy factor and that is under 2 per cent currently, and rents are increasing.
“So it’s a bit of a strange conundrum … most properties in the last three years went up nearly double, depending on where you are. So we’re just making an adjustment now.”
Domain data shows that the only suburb to see a median house price decline over the year was Applecross which had a downturn of 7.7 per cent.
The suburbs that saw the biggest price increase across the year were Leederville with an annual increase of 32.8 per cent, followed by Madora Bay (30.8 per cent) and Kalamunda (30.5 per cent).
Powell said that the shifting market was having a positive and negative effect on first home buyers.
“I think for a first home buyer, there would be absolutely the dynamics of the fear of missing out when you place it in the context of how fast house prices have risen over recent years,” she said.
“When you look at house prices over the last five years, they’ve risen 82 per cent in Perth, which is an extraordinary rate of growth over a five-year period. And when you look at unit prices, it’s 64 per cent.
So I think for first-time buyers hearing the news that property prices are now falling in Perth, that might give an element of hope that they now have a market that they can actually try and keep up with.
“But I think the flip side of that is when you do have property prices falling, this can also make first home buyers nervous because you don’t necessarily want to be buying into a market where property prices are pulling back, and that ultimately your home could be worth less tomorrow than today.”
Hay echoed similar sentiments, noting that first home buyers on the ground were more likely to sit and watch the market then try and jump in.
“It’s fair to say that the majority of first home buyers are sitting on the sidelines and waiting. And this is what uncertainty does,” he said.
“It’s the biggest fear, and we have a herd mentality. And when the chips are down, people say, ‘Oh, we’ll wait and see’ so everybody, including just normal people, are waiting and seeing.”
He said that drastic market fluctuations are not appealing to any audience.
“Nobody likes a booming market or a down market. We all like it slow and steady, and in a slow and steady market you should see five to 10 per cent growth a year.”
As for what the market will look like over the next few months, Powell said to expect a continued fall.
“[This data] means that Perth isn’t immune to the change in economics and those macro factors that are influencing our other housing markets,” she said.
“I think it’s very clear that Australia’s slowdown in pricing is now not isolated to our big major capital cities, as in Sydney and Melbourne. It is geographically broadened, and we’re seeing all of our capital cities fall.
“So I think that the dynamics that are happening for our housing market, do indicate that prices are likely to continue to fall, and we are likely to continue to see prices fall for the rest of this year and probably into early next as well.”