Perth has been “hot on the lips” of many property investors since the start of 2024. An increase in popularity and demand meant that the high amount of migration and relocation to Perth resulted in the median house price surging by up to 24.2%, reaching $745,000 by December and the median unit price increased by 21.4% to $500,000. This strong performance positioned Perth as one of Australia’s fastest-growing real estate markets for the year and there were many investors wanting to jump on board.
In 2025, we have seen the continued growth but at a moderated pace. The Real Estate Institute of Western Australia (REIWA) forecasts lower house price growth for 2025 to be between 5% and 10%. As of May 2025, Perth’s median dwelling value reached $813,088, reflecting an annual growth of 8.6%, showing signs that the Perth property market is slowly running out of steam.
What Factors are Influencing Perth’s Property Market?
- Supply Constraints:Western Australia is projected to build only 16,800 dwellings in 2025, while the state’s population is expected to grow by at least 90,000 people. This imbalance between supply and demand continues to exert upward pressure on property prices, which is fuelled even further by investors rushing in to snap up properties in the rising market.
- Economic Stability:Perth’s economy remains robust, underpinned by strong resource exports and infrastructure development. This economic stability sustains housing demand and supports property price growth.
- Interest Rates:The Reserve Bank of Australia is expected to reduce interest rates in 2025, which could further stimulate buyer demand and support price growth across the country.
How to Determine if the Market has Reached the Top
No matter the market you are looking at, be it Sydney, Melbourne, or Perth, when assessing whether it has reached its peak it’s crucial to consider all the indicators like supply/demand, economic and lending factors, auction clearance rates and days on market alongside the growth rates.
Here are key considerations to help you assess if a market is topping out.
Flattening or Negative Price Growth
A tell-tale sign of a peak is when consistent monthly price increases start declining, going flat, or even turn negative. Flat growth might indicate the market has reached ‘12 o’clock’ on the ‘property clock’.
Auction Clearance Rates & Sales Volumes
High seller confidence often shows in strong auction clearance rates and robust sales. A sustained drop in these metrics will signal weakening demand.
Market Psychology & Consumer Confidence
Inexperienced buyers will unfortunately follow a crowd. It is part of being risk adverse to feel comfortable in following what others are doing. We often see investors flock to a market and flood it with investor activity because of reports of investment success and a rising fear of missing out. However, the flip side of this equation is that when prices rise to high, there is anxiety about paying too much, some investors will start leaving the market and then all the investors may follow and the market will topple. The higher percentage of investors that there are in the market (compared to percentage of owner occupiers) will give a higher risk that a crash could occur when investors leave the market on masse.
Rental Yields
Strong capital growth should ideally align with rental demand and disconnect could indicate a warning sign. For example, if housing prices rise faster than rents, then yields will fall which impacts returns for investors.
Interest Rates & Lending Conditions
Any changes in monetary policy will heavily influence property market peaks. When prices stay high, any tightening of credit can abruptly cap growth potential.
If interest rates decline, property prices are expected to rise, and the opposite is often the case when interest rates rise. Another factor to so consider is the lenders themselves and their lending policies. If lenders tighten serviceability buffers, then borrowing will slow—and so too will property prices.
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Disclaimer:
Aus Property Professionals Pty Ltd retains the copyright in relation to all the information contained on its website and in this guide. This guide, and any content provided in addition, or linked to resources, is general information only and not investment advice. As everyone’s individual situation is different, we advise individuals to always seek advice from relevant professionals such as legal, financial, accounting, and investing experts.
The intention of this guide is to be used for general information purposes only, in addition to your personal research and due diligence. We do not take any responsibility for any actions taken as a result of this guide as any actions should always be taken with consultation with relevant professionals who take individual circumstances to account.
Past performance doesn’t guarantee future results.
We have compiled the information contained in this guide from online resources, our research, and consultations, and we cannot guarantee the complete accuracy of this information, and we will always reference the resources where the data and information was derived.
