The last year has seen the median house price in Perth jump by around 10% and if current trends continue, a similar rise can be expected during the coming year.
This is a fantastic result taking into account that the Perth inflation rate is around 2.6%. When you add in rents to capital growth, property investors are achieving around 6 times growth rate higher than the underlying inflation.
That is why so many property investors are now active in the Perth property market because capital and rental returns are so much higher compared to keeping their money in a savings account in a bank.
During the coming year, many Perth suburbs should experience double digit capital growth rates in prices due to our strong population growth rates and vibrant economy.
However, house price growth rates do not move in a uniform position and house price growth rates between areas can vary widely depending on where buyers are active and the supply of homes listed for sale.
During the past year, more affordable suburbs in the outer suburbs have performed strongly due to the impact of increased activity by first home buyers in the market.
For example, in Armadale, where the median house price is just $307,000, the median price of a home jumped by nearly 12% last year. During the coming year, I predict that near city suburbs should perform strongly due to the fact that the ripple effect at the bottom end of the market will flow into higher priced properties as the year progresses.
Upgraders are now more confident about taking larger loans and buying more expensive homes in areas of Perth especially in premium lifestyle areas along the river and beside the coast.
For investors, these more expensive suburbs do offer investment opportunities because you don’t have to buy a high priced home in these areas to gain a foot in the property market.
In South Perth, for example, where the median house price is over $1.1 million, there are still a wide selection of units and apartments priced for under $450,000 which offer high rental returns and well as long term capital growth rates.
These older style units and apartments can be cosmetically improved through new internal painting and floor coverings to substantially boost rental returns in a very quick period of time. As inner city areas, the demand for rental properties is always high.