Buying a home in Perth is always a huge accomplishment. Not just because of the financial muscle required, but also the time spent in researching and navigating the ever-changing Australian real estate market.
In this article, we’ll look into two factors that significantly influence Perth house prices, and how they can help you make a good decision when buying property in WA.
Inflation and Interest rates
You’re probably tired of hearing about the rising inflation. It’s been the topic of the day across the world for the past year, and its effect has sipped through all industries – housing included.
Impact of inflation on the WA property market
Higher inflation is often a double-edged sword for homebuyers and sellers. On one hand, the rising cost of goods and services leads to an increase in the valuation of homes, which is good for the seller, and bad for the buyer.
On the other hand, high inflation leads to a reduction in the purchasing power of buyers. This means that there’ll be fewer people who can afford homes, resulting in lower housing demand and, thus lower prices for homes. This phenomenon was experienced in 2023, with homes in Australia’s big cities, Sydney, Perth, Canberra, and Melbourne experiencing mild property price growth in a high-inflation environment.
Impact of interest rates on the housing market
If inflation rises, as it did in the past few years, the Reserve Bank of Australia (RBA) often resorts to increasing interest rates as a countermeasure. This move, however, becomes painful to anyone taking loans, including mortgages, since it makes the rate of interest repayment more expensive.
To put this to context, the RBA raised interest rates from 1.35% in July 2022, to 4.35% as of December 2023. That’s a whole 3% rise! But if interest rates can rise, then they can certainly fall. If they do, the repayment rates for mortgages also go down, making homes affordable.
Homes Supply and Demand
The price of houses is also affected by the number of homes available in the market (supply) and the number of people looking for homes (demand). If there is more demand for homes than there is supply, the prices for homes will likely skyrocket. If the inverse is true, (there are more homes available than the demand), the home prices will fall.
2024 Prediction for the Perth Housing Market
Predicting the trends of the Australian housing market is tough. However, economists project interest rate cuts from the RBA later in the year, due to the falling inflation. This could be positive news for you as a homebuyer. The gains, however, could be offset by the expected increase in home demand, as the country looks to welcome more immigrants to their job markets.
Is it a Good Time to Buy Property in WA?
As you’ve seen, even with the tough economic conditions experienced over the past years, the housing market still remains resilient. Even in periods of high inflation, there was still price growth, albeit marginal.
It’s, therefore, hard to make the decision on when it’ll be best to buy your home. Your best bet will be to look at your financial borrowing capacity, home preference, and whether you can still afford your mortgage in case of future rate hikes.