Perth Property Market Predictions 2025

The Western Australian residential housing market enters the 2025 calendar year as the jewel in the Australian property crown. There has been strong price growth performance in the 12 months prior, with many regions of WA recording double digit growth in the 15-20% range. The CoreLogic aggregate for year to date (Jan to Jan) shows 17.1% for the Perth metro across the board. Bag loads of suburbs joined the millionaires club last year as well, with 2025 set to be the year that the Perth median house price overall eclipses one million dollars.

This article will give our insights and predictions for the Perth property market for the 2025 year ahead. We will share some considered views on micro and macro-economic and social factors that will drive our opinions, hopefully these provoke some discussion and further thought for our readers as well!

The forecast and outlook for the Perth property market for 2025 is overall strong, but in hand with this are some unique and ongoing challenges we are still facing. These challenges aren’t going away, and some innovation and change of practice is needed to overcome these. Let’s take a look at our Perth property market predictions and commentary for 2025 in the article below.

The long-observed pattern in Australian housing (and what real time data is starting to revert to again) is that markets here are counter cyclical. When one part of Australia is going up, another is slowing down.  That’s actually natural, and quite normal. Ignoring the analysts making national housing doom and gloom commentary, let’s look at the facts: Sydney and Melbourne have peaked some time ago, and are overdue for some cooling off. In fact, these markets were at affordability crisis point just before covid kicked off, using the standard metric of considering the percentage of household income being consumed by the average mortgage.  Conversely in WA, at that time we had just begun to see green shoots after a prolonged retraction in the market. Some 4 odd years later, we are perhaps mid-way into our upswing and have plenty of room for growth left.

This will be buoyed by an ever-increasing diversity of job opportunities in WA. We are also seeing good migration numbers just for lifestyle and more affordable housing options than the eastern states. There is an influx of economic refugees, Australians from other cities who earn well but are tired of the inflated property prices and aggressive buying environment on the eastern seaboard.

What we are starting to see is the different markets in Australia find a natural and diverse rhythm again. The homogenised growth pattern we experienced over the Covid recovery period is wearing off. This was an inorganic growth pattern and correlation primarily driven by government intervention: unified federal and state government approaches to stimulus measures and social behaviour policy. The effects of this are now well and truly wearing off.

The return to diverse and sustainable growth rates in the national housing market.

The important takeaway Perth is not tied to the eastern states housing market (our economy and demography is different), we still have room on all ordinary metrics for years of upswing left, and its normal that not all markets are going up at the same time and at the same rate.

Add to this, as markets over east cool and fall and affordability peaks, this will in fact drive more homeowner and investors alike into our market. There will be plenty looking for an affordable place to live, or an investment that is not purchased in a falling market. Neither investors nor homeowners like buying high and selling low.

Rampant, compounding growth rates of 15-20% per annum of the like we saw post covid in every capital city in Australia are unsustainable, by any measure. It was a flash in the pan, driven by ill thought-out stimulus incentives and the ability for punters to go on spending sprees thanks to record low interest rates and burgeoning household savings kitties. The knock-on effects not even 5 years later to housing affordability and delivery ability, the subsequent pressure on wages, retail spending, cost of living, and overall inflation has been horrific.

The 17.1% growth level achieved by the Perth property market over the last year (the aggregate median lift according to CoreLogic up to Jan 2025), whilst a big hoorah in some aspects, will possibly be the last time we see that for some time. And that is also to be celebrated.

Analysts from various banks and private investment groups are now tipping growth in the year 2025 of anything between 4 and 15%. Depends on who you ask. The year after that might tighten again. The important thing is there is consensus we are cooling off a bit, and won’t be going back there. This should provide some relief to the astute investor and developer, looking for stability and sustainability with their money.

I’d reminds anyone to take stock of reality: 5-8% PA is a great and normal growth range in property during upswing. More than 10% in a property market is a bumper year, an absolute boon. The only reason we have been aggressively expecting pursuing more since the end of covid is because it actually happened, and real inflation was rampant and hovering well over the 5-8% mark. It was a chicken and egg scenario, they fed each other. Now it’s time to curtail that and come back to earth a bit.

We welcome a normal range of growth sustainable (6-10% PA) over a longer-term period. Slower rates of growth are sustainable, to a point one may even be able to safely develop some property and amass a portfolio over a regular but extended period of market upswing activity. Any savvy developer or investor would not be attracted to violent peaks and troughs. Simply put, the bizarrely celebrated and now thankfully finished compounding 20% growth rates around the country are over, and we will slowly balance back to sustainable growth rates.

The opinions of far more educated financial analysts than myself is that we are due for a few rate cuts this year. This will deliver much needed relief to existing homeowners, and more importantly, drive some increase in demand into mid and high end segments of the property market. Id expect by the second half of this year to see bigger movement and rates of change in values in the middle and upper end of the market than the lower end of the market. This is because families looking to climb a suburb will see affordability improve with a few rate drops and some more savings in the bank.

The lower end of the market has don’t its dash for the time being (the bulk of the 20% PA plus growth suburbs in WA being in that quartile for the last few years). In the bottom end of the market, 700k is the new 500k. Now it’s time for the middle and upper ends of the market to proportionality follow suit. Some rate drops will help that, as will falling prices over east: middle and upper tier blue chip investors will also start to see good value in those segments of the Perth market.

We have certainly noticed that pricing in the top end of market (and demand) has stalled. The growing upper and middle class can’t move because the banks means testing on their current wages and interest rates has hamstring many of them from completing a suburb upgrade. They simply can’t afford to do so. This will change into the second half of this year, as affordability increases for those homeowner segments. A rate fall is of course is also welcome in the balance sheet of any developer too, whether it be for project acquisition or construction funding.

With specific reference to the cost of delivering domestic housing, we are still in a volatile climate. For the first half of last year, build permit numbers had dropped in aggregate around 1000 per month, giving us indication of some relief on the cost of labour as demand for services had cooled, probably of the back of high pricing. By the end of last year however, consumers seem to have adjusted to the stable (albeit higher) new norm of build pricing. By the last quarter of last year, build permit numbers were back up to around 1500 per month, marking a 50% increase in future demand for about and materials. It’s possible that the next wave of skilled labour trade shortages may well be inbound.

Materials supply since covid has steadied, but the supply of skilled labour is still an unsolved problem. We need another 12-15000 skilled workers immediately in the construction sector in WA alone, but there is nowhere to house them.

This will take some time to alleviate. However, ongoing delivery headaches are driving innovation or alternate approaches to construction delivery and methodology, including:

• Prioritising Design simplification and efficiency
• Avoiding two storey dwelling and small apartment construction
• Prefabrication of parts of (or entire) dwellings
• Using wall framing and alternate construction methodologies that reduce wet trade or multiple trade dependencies.

Our isolation in WA helps in some aspects and hinders us in others. The Australian Construction Market View showed the construction price index in Perth was up around 11 per cent last year, the forecast was for 7 per cent. The real rate was also almost double the actual rate of the next-fastest escalating Australian city. According to some analysts, construction costs in Perth could increase anything from 35- to 45 % by 2028, if we don’t get inflation and delivery woes in check. Megaprojects, such as the Perth airport development, Burswood point redevelopment, the new women’s hospital and other big infrastructure spending is also putting pressure on the labour pool and pricing.

Leading into 2025, WA will begin to provide growing job opportunities in all sorts of new, medium and long term industry sectors, many of which are not mining related. This is not only exciting but also helps to add diversity and sustainability to our employment sector. We are no longer just a big hole in the ground. We are luring lots of talent and migration into the state, to fill positions and develop new technology and primary industries. These people all need houses to live in and are set to stay, which is good news for property developers here.

Enormous defence and defence support spending is underway; the federal government has signed off on 160 million dollars for master planning of the Henderson precinct, with another 4.5 billion dollars committed over the next decade to project delivery. There will be new shipyards and support industry facilities. A large subsea technology precinct is also being developed between Cockburn and Kwinana, with other industries as such as metallurgical extraction for rare earth and and battery manufacturing also underway. The southern corridor will boom in the next decade and is a great place to invest and develop.

As for the big hole in the ground, don’t believe all the doom and gloom you read about in the news. As iron ore floats at around $80 a ton, and struggles stay there, you’d be reminded that the big miners (RIO, BHP and Fortescue) are pulling most of their ore out of the ground for about 10 to 15% of this price. The much talked about WA iron ore killer, the Chinese government backed development of the Simandou deposit in West Africa, has peak forecast production of 120 million tonnes a year by 2028. Anyone who has invested in or done business in Africa knows a lot has to go right to meet peak production over there.

If it hits peak capacity, will this sink our iron ore export market to China? Well, by the end of last year, even with domestic demand in contraction, China bought a record 1.24 billion metric tonnes of iron ore from overseas. If Simandou hit peak production and Chinas demand halved, they’d still be almost 80% short. It might be fair to assume that tap is not turning off overnight in Western Australia.

And other resources? Gas is flying out the doors, with Woodside given the green light for further expansion and operation until 2070 by the government in the northwest basin. Gold is on the up. New rare earth minerals that we have plentiful but untapped supply of are increasing in demand. These are now being explored and fought over. As one door closes, another one opens: there is endless opportunity in resource rich WA, which means job opportunities. Choice abounds.

With all these people moving to WA, and no easy fix to our delivery woes, we are still at least half a decade away from any serious semblance of housing supply balance. By the end of last year, we had a big jump in stock extra listings, but we are still 6-8000 dwelling listings (sustained) away form being a balanced market. To provide context, we need 6 months’ supply in listings to call a market balanced, by the end of last year Perth had maybe a quarter of that. We are a long way off a balanced market. Listings have gone up but not proportionate to population growth and demand. This is reflected in the indirect relationship shift in days on market. There are more choices for buyers, so they go to a few more home opens: things take a few extra weeks to sell, but pickings are still slim, and record prices are still being paid. And it’s likely that that is not changing for some time.

An investorKit paper stated that 3 of the worst markets facing critical supply crunches in 2025 are in Perth. This is spearheaded by Fremantle, where population growth to hit just under 15%, whist the for-sale listings decreased to the tune of 30 per cent over the decade, and new dwelling construction approval rates here have decreased by almost 75% in the last 3 years. Both Bayswater and Bassendean area are not much better, seeing population increased around 7 per cent in the last decade whilst for-sale listings decreased just over 20% per cent. The build permit approval rates? Down 65 per cent in the past three years.

These are some of the worst numbers, many other suburbs are only marginally better and just avoided the top 3. Based on these supply and demand numbers, is there an easy fix to our housing market, and can values fall? It would seem, at an educated guess, highly unlikely.

It’s not all bad in WA, in fact, the outlook is quite good. The advice is to move with diligent optimism: be discerning. Don’t listen to everything the media tells you. Do your own research and make informed decisions for yourself. Holistically, when we look at the case for and against, WA and the Perth market is still a great place to be for 2025, and the foreseeable future. At a glance, investing and developing here for at least the next 4 to 5 years seems to make sense. There are challenges and difficulties for sure, but it has many indicators to say it has the some of the best opportunities for sustained economic growth in the medium to long term in Australia. That means people want to live and work here, and that means they need somewhere to live. That’s not just up to the large-scale developer, that’s up to infill developers like us to help meet that demand with housing as well.