Perth set to be best market for cheap house prices after pandemic

House prices have fallen there for years. And as big houses go for a steal, this could be the sweet spot for a post-corona lifestyle.

Perth’s property prices have been falling for a while, but now even Hobart is more expensive. I almost can’t believe it.

A huge shift has happened. Hobart lifted itself up so its houses cost more than houses in Perth, as the next graph shows. (Sydney is included to show the other end of the spectrum.)

A David and Goliath struggle has ended with the capital of the tiniest state somehow overtaking the capital of the biggest state.

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Hobart’s average daily maximum in June is 12C and the wind howls in off the Southern Ocean. In Perth it is 19.5C. Where would you rather be?

Perth’s prices remain ahead of Adelaide, but only by the faintest of margins.

Perth’s house prices have been falling for a long time, as depicted in the next graph. While it’s still possible to shout “bubble” at prices in Sydney and Melbourne, the same is not true of Perth, where prices are roughly where they were in 2007. The downside risk of a Perth house purchase has to be quite low, and that has to be attractive in our current era where nobody is sure what will happen next.

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House prices – peak to trough.

So why would you move to Perth? After all, property prices aren’t everything. The answer is that Perth is a serious city, with two million residents and a fairly healthy economy. The mining boom is not what it was admittedly, but iron ore prices are still above $US100 a tonne, which is historically very high.

As the world recovers from coronavirus, iron ore and energy exports are likely to pick up again, which spreads wealth through the state of Western Australia.

WA has higher unemployment than most other states at the moment, it’s true. But it also has jobs on offer. There are 14,400 jobs advertised in Perth at the moment according to the official Australian government vacancy report. That’s more advertised jobs per person in Perth than in Sydney or Melbourne. WA also offers higher wages. In the most recent data, average weekly full-time earnings in WA were $1778, substantially higher than NSW at $1680 and Victoria at $1647.

Those wages apply for the state of WA at large and we know some people earn a lot of money working outside Perth. What about the city itself? To get information on the capital city we can go back to the 2016 census. Perth median weekly household income was admittedly lower than Sydney’s household income – $1643 vs $1799. Weekly household income is lower by $156. But the median mortgage was lower by $167, so that balances out. And remember – property prices are lower in Perth than they were in 2016, but higher elsewhere.

Speaking of mortgages, let’s look at just what it means to pay less for housing. In Sydney, for the median house price of around $900,000 you can buy this four-bedroom home 47km from the Sydney CBD.

A house for sale in Box Hill Sydney.

For the same money in Perth you can have this four-bedroom house 4.8km from the CBD.

A house for sale in Victoria Park WA.

That’s a lot of commuting time you could save. What are you going to do with it? The answer is probably go outside. This is where Perth does especially well – lifestyle. It’s the ‘hours of sunshine’ champion.

Whether you like the beach or just want to extract value from your solar panels, you can’t deny Perth gets a lot of hours of sunshine. Annually it averages over eight hours a day, which is more than Melbourne, Brisbane, Sydney, Hobart and Adelaide. In summer it gets over 10 hours, as the next map shows.

Perth is undoubtedly the champion when it comes to sunshine. Picture: Bureau of Meteorology

We’re not just talking hours of daylight here, but actual blue skies. The Bureau of Meteorology uses a literal crystal ball to measure daily sunshine hours. They place the ball, known as a Campbell-Stokes sunshine recorder, outside, and place a piece of card under it. If the sun is out the ball focuses the sun’s rays and burns a mark onto the card. While Melbourne cards stay virginal and pure, in Perth the cards crisp up.

Western Australia has done a great job dealing with coronavirus. Almost all of its cases were in returned travellers and it currently has just five active cases. While recovery will be tough everywhere, places that dealt with the virus best are likely to make recoveries sooner and stronger, having shorter lockdowns and attracting more tourists. Don’t be surprised if, after COVID, people you know start moving west.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.