Property is cheap, beers are cheaper and never has there been such a divide in affordability between Perth and our east coast counterparts. History would suggest that WA is countercyclical (opposite market direction to NSW/VIC). So, now that the powerhouses are slowing (not crashing like some experts might have you believe) does that mean WA will begin improving?
The break in the clouds for property here in Perth is a significant enhancement in affordability. While I sit here in the heart of Subiaco, enjoying a $3.5 pint of local lager, there is no wonder I have found a few extra dollars in my bank account. Combine this with low property prices, low interest rates and income growth, then there is no denying why affordability in Perth is the best it’s been in a decade.
Never has the divide between Sydney and Perth house prices been so significant! In 2007 at the peak of Perth’s last cycle, Perth houses prices trailed the Sydney median by 8%. Fastrack a decade, and this division has exceeded 54%. Over that exact same period, Perth wage growth has ascended 45%, while Sydney only 25%!
Fundamentally, despite stronger wage growth, Perth house prices haven’t moved in a decade, during the same period Sydney house prices have more than doubled. This is evident when analysing the affordability index, which alone tells a compelling story. The affordability index highlights that 24% of the average income in Perth is consumed by the average mortgage, in comparison to Sydney, it’s 60%! Which only further emphasises Perth’s undervalued potential, considering we have seen such parameters reach the heights of 41% in 2006. And what a year that was!
When collating and analysing data, you can often arrive at multiple conclusions. However, one bold correlation can be made between median house price movement and Eagles premierships. Over the past 30 years, the two single greatest spikes in price movement have correlated directly with Eagles Premierships 92-94 and 2006. Coincidental? I don’t know, but if this is the case, Eagles had better start preparing for the 2019 season because the reality is we aren’t going to see the heights of 22% and 36% growth this year.
West Coast fans may have to be a little patient, because although there is a compelling case to be made for affordability, there is inevitably still an oversupply and a vacancy issue in particular submarkets in Perth. Therefore, it’s as important as ever to buy right and be diligent when acquiring property.