Is your home-buying budget $500,000? Your options in Perth are slowly shrinking

Affordable property options in Perth are continuing to decline with less than half of the homes for sale in Perth selling under $500,000.

A Perth home buyer on a $500,000 budget could have purchased 64 per cent of homes that sold in 2020, property settlement data from PEXA shows.

There’s no sign of Perth’s house price growth slowing in the near term.Credit: Ross Swanborough

Their options had dropped to 48 per cent of homes by last year and are expected to reduce further this year as Perth’s median house price continues to rise beyond its current median of $742,390.

While the proportion of affordable home sales has declined, transactions exceeding $2 million have doubled in Perth since 2019, rising from 702 transactions to 1575 in 2023.

Regionally, the number of transactions exceeding $2 million has tripled.

The proportion of cheaper sales fell in all SA4 regions in Perth, except for the inner city – which includes the wealthy western suburbs – as well as Highgate, Jolimont and Glendalough, where the percentage of properties sold for less than $500,000 increased from 30.4 per cent in 2020 to 36.3 per cent in 2023.

Some of the largest declines in affordable housing were on the urban fringe in suburbs popular with first-home buyers seeking detached dwellings and house-and-land packages.

In Perth’s booming north-eastern corridor, which includes Ellenbrook, Brabam, Chidlow and Midland, the chance of buying a sub-$500,000 home have plunged from 77 per cent to 55 per cent.

In Mandurah, buying a home that costs less than half a million dollars fell by 20 per cent between 2020 and 2023.

A PEXA spokesman said while the number of homes sold under $500,000 in Perth declined in 2023 compared to 2022 and 2021, these were unusual boom years for home sales and prices.

“The number of homes sold in this price bracket in 2023 remained higher than the number sold in 2020 and 2019,” he said.

“WA’s property market remains extremely tight, with population and incomes growth supporting demand, even as construction capacity constraints hamper growth in new housing supply.

“This is a national problem at present, but it is particularly pronounced in WA, which has above-average population, employment and incomes growth.

“This is likely to see further upward pressure on property prices through 2024, from already high levels.”

“The losers in all of this have been first-home buyers … fear of missing out in the rising house price environment has not been enough to stop them from being outmuscled by investors.”

Steve Mickenbecker

It comes as new data out on Thursday from the Australian Bureau of Statistics revealed the average loan size in WA was at a record $530,000, a rise of 11 per cent – or almost $52,000 – in a year.

In January 2014, WA’s average loan size was $395,600.

Oxford Economics Australia senior economist Maree Kilroy said it was the strongest growth in the nation, with further price gains in 2024 likely to be driven by the widening gap between demand and supply.

“We estimate a national dwelling stock shortage of 110,000 which is positioned to expand further,” she said.

“This will be the anchor for further price gains in 2024.”

Kilroy said expected interest rate cuts in late 2024 would likely push house prices higher.

Canstar financial services group executive Steve Mickenbecker said new housing lending in WA had bucked the national trend, with the value of lending rising in January by 1.6 per cent for the month, compared with a 3.9 per cent fall nationally.

“All borrower segments are showing growth year-on-year, but the investment lending market has been booming, with growth over the year of a massive 63 per cent,” he said.

“The strong investment market nationally with 18 per cent growth looks pedestrian compared to Perth.

“While upgraders and downsizers are flat nationally and likely to remain so until rate cuts come along, Perth residents are not waiting, with volumes up for the yearly 12.5 per cent.

“The losers in all of this have been first-home buyers, only borrowing 2.6 per cent more than a year ago.

“Fear of missing out in the rising house price environment has not been enough to stop them from being outmuscled by investors.”

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