Western Australia’s booming economy could send property prices soaring.
The nation's western most state once again claimed the title of the strongest economy in the country, according to Commonwealth Bank's (CBA) October quarterly CommSec State of the States report. WA topped the nation in household spending, household finance, dwelling starts and equipment investment for the fifth quarter in a row.
“Western Australia continues to perform strongly, underpinned by strong population inflows, resilient household spending and ongoing government support,” said Ryan Felsman, chief economist at CommSec, the digital broking arm of CBA.
By the numbers, WA had double-digit growth in its four leading categories for the quarter. That includes 42.5% above the state's long-run average in housing finance, 32.9% above the equipment investment average, 24.8% above the 10-year average in dwelling starts, and 14.8% above the average household spend.
That's good news for job seekers, small businesses and existing homeowners. But local brokers warn that new housing isn't keeping up with demand, which means property prices will likely continue to climb.
"The housing industry just can't build enough houses," Damian Collins, founder and managing director of Perth-based real estate investment firm Momentum Wealth, told Australian Broker. "There's a massive shortage of houses for sale. And even the rental market is very tight."
Collins said a balanced market would have about 13,000 to 14,000 houses for sale. According to data from the Real Estate Institute of Western Australia (REIWA), there were just 2,832 properties for sale in Perth, WA's capital city, for the week ending 19 October.
"And that includes blocks of land," Collins said.
Meanwhile, the state continues to attract an influx of new residents, thanks to job opportunities and nice weather. WA's unemployment rate was 4.3% in seasonally-adjusted terms in September, compared with the national average of 4.5%.
"The economy is very strong, which is driving population growth, driving migration; there's lots of jobs. The state tends to attract overseas migration because of the lifestyle and the job opportunities," Collins said. "But the housing industry just can't build enough houses. So I certainly expect prices will finish up somewhere up 10% this year, and likely increase another 10% next year as well."
Perth property prices rose 7.5% in the 12 months leading up to 30 September, according to Cotality's (the company formerly known as CoreLogic) latest Home Value Index.
"But it is still accelerating," Collins said. "So I believe by the time the data gets to the January to December numbers, it'll be up 10% [for 2025], and likely another 10% next year, as well."
In 2023, Prime Minister Anthony Albanese – who was re-elected to the Labor Party in May – laid out an ambitious plan to build 1.2 million new homes across the nation by 2029 by way of the National Housing Accord. But the latest Australian Bureau of Statistics (ABS) stats suggest Australia is falling short. In August, total building approvals fell 6%. That's on top of a 8.2% decline in July.
And the numbers reflect only the number of new building approvals, not actual completions. That means many of the approved projects may never reach completion.
WA seems to be gaining traction in new builds. In the latest quarter, new dwelling starts were 24.8% above the decade average.
But Collins said it's not fast enough.
"[Housing approvals] have definitely increased. But it's come off a low base," he said.
Factoring in population growth, the Perth-based broker estimated that the state would need around 28,000 to 30,000 new building starts per year, versus the roughly 21,000 reported by the state’s Housing Industry Forecasting Group (HIFG) between 2024 and 2025.
"We've already got a shortage. And with what we're building now, there's not even enough to keep up with the current demand, let alone the backfill of about 15,000 properties that we need," Collins said.
"Barring a big, massive slowdown in population growth, we're going to be in a shortage for many years ahead, and simply not able to catch up," he continued. "If things keep on going the current way, I can't see getting back to a balanced market for at least three years, maybe longer."
Collins said that in WA’s tight housing market, the smartest move is for brokers and prospective homeowners to make sure money matters are in order.
"You've got to have everything lined up," the broker said. "You have to have your finances well and truly pre-approved and ready to go, so you can make swift and solid offers that stand out from the crowd.
"Every week there are still about 800 to 1000 properties across Perth selling. So it's not like there's no opportunities at all," Collins said. "But they're very hotly contested. That's the reality where we're at: you have to make offers solid, put your best foot forward and don't try lowballing, because you'll get beaten.
"If you're not organized and then you want to go and put an offer in, subject to finance, and mess everyone around, it's likely that the other offers – even if they're at the same price or even marginally lower – the people will take the other offers. Just because there's so much demand out there," he said.
