The iron-clad reason this investor thinks Perth house prices will fall in 2025

Perth’s booming property market could experience a price drop next year on the back of falling iron ore prices, according to industry forecasters.

Despite a new report predicting Perth’s housing market could lead the nation with price rises of up to 19 per cent in 2025, Adpen investment firm managing director Adam Pennisi believes the local housing market was so reliant on mining – particularly iron ore – that the reduced forward output forecasts pointed to a fall in house prices.

A downturn in the mining industry could see Perth property prices fall.Credit: Cameron Myles

“I’m seeing so many people buying Perth with stars in their eyes that the market will keep booming, but there will be a time when the music stops,” he said.

“Investor-driven areas of Perth with more new supply coming online and pumped up values will likely take a price hit as investors pull out of those markets to chase the same yields in other capitals with more stable economies.”

SQM Research founder Louis Christopher said China, the single largest buyer of Australia’s iron ore, was in an economic downturn, with Beijing’s demand for steel falling off the back of a collapse in its property market, as well as a population slowdown.

It also comes as WA’s position as the world’s dominant iron ore producer is threatened by a significant increase in supply expected from Rio Tinto’s Simandou project in Guinea, currently under construction, with first production scheduled for late 2025 or early 2026.

Christopher said when iron ore prices dipped below US$100 a tonne to US$39 a tonne in 2015, it sparked a housing downturn in the west.

“Due to labour and rental costs increases, I doubt we will see a bargain price like that again, but I also doubt it would take such a fall to see a new downturn,” he said.

“If iron ore prices suddenly plunge, then the WA economy and its housing market for that matter, could turn on a dime. There wouldn’t be much warning.”

The WA government’s state budget 2024/25 forecasts the iron ore price will average US$75 a tonne 2024/25 and US$71 a tonne in 2025/26.

Mining is the single biggest contributor to Perth’s economy, employing about 130,000 workers and making up almost 40 per cent of the state’s GDP, according to figures from the Department of Energy, Mines, Industry Regulation and Safety.

Christopher said the unemployment rate had been inching back up in Perth to 4.5 per cent, and believed if it rose beyond 6 per cent that could trigger a fall in the local housing market.

Chamber of Minerals and Energy WA chief executive officer Rebecca Tomkinson said ABS labour force data found overall employment in the WA resources sector declined by around 20,000 (11.7 per cent) in the year to May 2024.

She added iron ore prices were down roughly 30 per cent since the start of the year, lithium has fallen 90 per cent since peaking in January 2023, and nickel prices have halved since mid-2022.

“Public announcements since the start of 2024 indicate over 6000 jobs have or will be lost as a result of nickel, lithium and iron ore operations either shutting down or being placed into care and maintenance,” she said.

“Many of those announced losses will only crystallise in FY25, an outcome that threatens to end the seven-year run of on-site resources sector jobs growth charted by DEMIRS.”

Pennisi said if iron ore production fell by 30 per cent, it could mean about 20,000 of the 60,000 workers employed on iron ore projects would be unemployed.

“The iron ore forecast isn’t looking too crash hot for the next few years,” he said.

“If there are less people employed in the mining industry that’s going to have a direct impact to the demand for housing and ultimately the prices that people are willing to pay both for rentals and purchases.”

However, Planning and Housing Minister John Carey said there were diverse views in the real estate industry as to what property prices in Perth would do over the next year.

“Ultimately, I rely on the Housing Industry Forecasting Group which has key industry representation, including the HIA and I can’t let my foot off the accelerator,” he said.

“The advice to me, is that we’ve got to continue to drive and boost housing supply.”

Shadow Treasurer Neil Thomson said fresh ABS data showed WA was grappling with a troubling slowdown in economic growth, down to 0.5 per cent for the last quarter.

He said WA’s economic slowdown came at a time when there were already mounting job losses.

“Alcoa, Nickel West, and now Albemarle have all shuttered operations in WA on Roger Cook’s watch,” he said.