Perth property: Price of cheaper homes increasing three times faster than city’s most expensive houses

The affordability crisis has been highlighted by the quick-paced rise in the price of entry-level homes, with values jumping three times faster than Perth’s most expensive houses. New data from the Real Estate Institute of WA shows the value of the cheapest 25 per cent of houses has grown 8.2 per cent over the past year, with the maximum price in this bracket rising from $420,000 to $456,000. But the full extent of steep hikes in the first-homebuyer market has been highlighted by some exceptional sales, with some homes jumping an astonishing 50 per cent in 18 months, without renovations. This compares to more moderate growth in the top 25 per cent of most expensive homes, which has experienced a 2.7 per cent price growth over the past year, inching the minimum price threshold from $750,000 to $770,000. Houses within the middle band of prices — between $456,000 and $750,000 — increased by 5.6 per cent in that time. Real estate agent Vicktor Sutrisno of Stratton Realty said he was selling unrenovated homes in the entry-level market for 50 to 60 per cent more than the sale price for the same properties in 2021 and 2022. Investors in these homes are getting better returns than many blue-chip resource stocks, like BHP and Fortescue, over the same period. Mr Sutrisno’s sales include a three-bedroom property on Devereux Street, Armadale, which sold last month for $325,000 — more than 50 per cent above its $210,000 sale price only 18 months earlier in March 2022. It took three days to sell last month, compared to 130 days last year. Another example on Westfield Street, Maddington, sold for $480,000 this month, which was nearly 60 per cent above the last sale price of $305,000 in February 2021. Mr Sutrisno said neither home had been renovated, but they had appealed to investors because of their big blocks and high rental yields. He said half of all his sales were to east coast investors. While the REIWA data relates only to houses, real estate agent Nola Tully of Harcourts said units were also enjoying strong gains. A unit on Victoria Street in Rockingham late last year sold for $590,000, up $85,000 in less than two years, without renovation. REIWA chief executive Cath Hart said strong demand in the entry-level market came as rising interest rates and the cost of living drove more people into cheaper markets. She said Eastern States investors were snapping up cheaper houses because Perth had the best rental yields of all capital cities. A third of all investment properties sold nationally in the first three months of the year were in WA. There was also strong demand for affordable homes from tenants fed up with harsh rental increases. “Affordability and serviceability have been a focus for buyers in the past year,” she said. Ms Hart said the competition for more affordable houses, combined with the relatively low supply, had put pressure on prices. She expected demand would remain “very strong” in the lower quartile this year, but the strongest sales activity was expected to be in the middle market. “The WA market has shown resilience in the face of increasing interest rates, underpinned by WA’s higher than average wages and lower than average mortgages, and this is supporting the middle of the market,” she said. Sales volume and price growth in the upper quartile has been the most stable and is tipped to remain so this year.