House prices to grow further in 2024: REIWA market forecast update

Perth house prices are set to grow 10 per cent in 2024, according to REIWA’s 2024 property market quarterly update.

Rents are also expected to rise, although the rate of growth may slow.

“The raft of interest rates rises in 2023 did not slow the WA property market,” REIWA CEO Cath Hart said.

“After a slow start, house sale price growth accelerated over the year, recording 2.6 per cent growth in the December quarter and 8.3 per cent over the year to reach a median of $590,000.

“This is a new record for Perth house prices. While it is 24.2 per cent higher than the low of $475,000 recorded in 2020, it is only $45,000 or 8.3 percent higher than the previous peak of $545,000 reached in 2014.”

The median unit sale price was stagnant for many months across 2023 but started to increase at the end of the year, rising 2.0 per cent over the December quarter and 0.7 per cent over the year to a median of $408,000.

“We can expect more increases in the median unit price in 2024,” Ms Hart said.

“With houses in limited supply and prices rising, more people, particularly those seeking to escape the challenges of the rental market, are looking to units as an affordable way to enter the market.

“And while it has risen, the median unit price is still 9.3 per cent below the record of $450,000 set in 2014.”

2023 saw the market set records for the median house price, the median time to sell (eight days), and new lows for the number of properties for sale (3,648 at the end of December).

Ms Hart said the key drivers for the market in 2024 would be population growth, building completions and the WA economy.

“Population growth is a significant factor behind housing demand,” she said.

“WA recorded a 3.1 per cent increase in its population in the year to June, the strongest growth rate in the country, according to the Australian Bureau of Statistics.

“That saw our population grow by nearly 87,000 people, with immigration and natural increases. That’s about 35,000 additional households in 12 months, if you assume there are 2.5 people per household.

“However, in the same timeframe about 14,000 new homes were completed. That’s a shortfall of over 20,000 dwellings, which is putting incredible pressure on the established homes market and driving up prices.

“More population growth is expected over the next year, with the State Government revising its forecast population growth of 1.7 per cent for 2023-24 to 2.4 per cent in its mid-year budget review.

“However, the Housing Industry Forecasting Group expects about 15,000 to 16,000 new dwellings to be completed in the year to June 2024.

“Based on these figures we can expect demand for established homes to be high for some time to come.”

Ms Hart said a strong economy drove population growth in part, with people moving to WA for employment opportunities, while low unemployment meant people were more likely to be able to afford to buy a home and adapt to changes in interest rates.

“The latest figures published in the mid-year budget review suggest the economy will remain strong, with the State Final Demand revised up from 3 per cent at Budget time to 4.5 per cent. This builds on growth of 3.8 per cent in 2022-23,” she said.

“Labour market conditions also remain strong, with employment growth more than double the Budget forecast and the average unemployment rate over 2023-24 revised down to 3.75 per cent from 4 per cent.

“Mining, which is a significant contributor to the WA economy, is also performing well.”

Inflation appears to be slowing and should the RBA lift rates in 2024 things could change but appears unlikely.