Has the Perth Property Market Run Out of Steam?

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 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.

For anyone entering the market for the first time, working with a residential buyers agent can help clarify whether Perth still offers good value or whether the strongest growth phase has already passed.

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.

For a first home buyer, this can create a difficult decision: waiting may improve borrowing conditions, but stronger demand after rate cuts could also push prices higher.

How Can You 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 and 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 and 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 and Consumer Confidence

Inexperienced buyers will unfortunately follow a crowd. It is part of being risk averse 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 too 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 the percentage of owner-occupiers, will give a higher risk that a crash could occur when investors leave the market en masse.

Why Do Rental Yields Matter When Assessing Perth’s Market?

Strong capital growth should ideally align with rental demand, and a disconnect could indicate a warning sign.

For example, if housing prices rise faster than rents, then yields will fall, which impacts returns for investors.

A residential buyers agent can help buyers look beyond headline growth figures and assess whether the property still makes sense based on demand, local fundamentals, rental performance, and long-term value.

How Do Interest Rates and Lending Conditions Affect Market Peaks?

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 consider is the lenders themselves and their lending policies. If lenders tighten serviceability buffers, then borrowing will slow — and so too will property prices.

For buyers relying on a first home buyer loan, changes in borrowing capacity, lender policy, and serviceability rules can be just as important as the headline property price.

Final Thoughts

Make sure you head over to our YouTube channel by clicking here to discover more educational insights to level up your property investing including our latest video: Australian Property Market 2025 Forecast.