2022 to see national rebalance in Perth’s undervalued house prices
In historic terms, Perth house prices are now massively undervalued compared to the national average for Australian capital cities, according to Nu Wealth Managing Director Daniel McQuillan.
“Overall, Perth house prices are set for a major national rebalancing as occurred 20 years ago, beginning in 2002,” he said.
“The latest national figures produced by the Real Estate Institute of Australia reveal that the median house price in Perth at $520,000 was the lowest median capital city house price across Australia and 45.9 per cent lower than the national average.
“This is a historic anomaly that will be reversed beginning in 2022 based on the strong economic fundamentals in Western Australia over the coming years.
“The fact is that WA has the lowest unemployment rate in Australia of just 3.8 per cent and the strongest economy nationally.”
Mr McQuillan said the state economy was expected to grow by 3.5 per cent in 2021-22, which would be the fastest in eight years, delivering a budget surplus of $2.24 billion while many other state budgets were in deficit – for example, the Victorian state budget is expected to record a deficit of $11.6 billion.
An additional 51,500 jobs are expected to be created this financial year in WA, with unemployment expected to remain very low over the next four years, fuelling the demand for workers and housing.
“Currently, the weighted average median house price for the eight capital cities is $961,642,” Mr McQuillan said.
“Based on the strength of the WA economy, the median house price in Perth should be at least on par with the weighted national average, meaning the city has the capacity to gain an additional $400,000 in its median house price.
“It was only back in December 2013 that the median house price in Perth was near on par with Melbourne. Now the price differential is over $500,000.”
Mr McQuillan believed the current national imbalance in Perth house prices was unsustainable and, during 2022, the median house price in Perth would start to gain traction as investors appreciate the city is undervalued. This upward climb in Perth house prices should last several years.
“Property investors in areas such as Sydney and Melbourne are now selling their properties, as they believe the market there offers more downside than upside, and they will start to invest in undervalued markets such as Perth, particularly after our borders open from February 5,” he said.
“A similar trend occurred 20 years ago in 2002 when the median price of a Perth home climbed from $190,000 to $465,000 in 2007. This is part of the national property clock, and Perth is now passing six on this national property clock on its upward march to 12.
“2022 is shaping up to be a breakout year for the Perth property market and investors should act now and get in early before prices start to rise rapidly, especially in undervalued suburbs of Perth.
“These undervalued suburbs are located in areas of traditionally high capital growth in the city – close to the CBD, ocean and river.”
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