![Across the greater Perth area, 97 per cent of suburbs were at a record high for dwelling values the highest rate in the nation while 60pc of suburbs in regional WA were at their peak. Graphic: CoreLogic Across the greater Perth area, 97 per cent of suburbs were at a record high for dwelling values the highest rate in the nation while 60pc of suburbs in regional WA were at their peak. Graphic: CoreLogic](/images/transform/v1/crop/frm/79654223/2ad8c36f-6c1d-4033-a232-134e7c18170d.jpg/r0_16_2362_1643_w1200_h678_fmax.jpg)
WA'S extraordinary run of housing price growth risks a big correction down the track, according to CoreLogic research director Tim Lawless.
Mr Lawless's recent analysis of Australia's house and unit values and the impact of the recent interest rate price hike cycle offer more weight to show WA has been leading the nation in price growth rates.
Both Perth and regional WA are showing exceptional and stunning increases, but as they are coming off a historically weak market, the State remains relatively affordable so far.
"Looking at the regional data for WA, it is by far the strongest regional market around the country,'' Mr Lawless said.
"Housing values are up 20.4pc in the past 12 months across regional WA.
"Compared to Perth - which is up 26.8pc in 12 months - it is a little bit softer, but compared to other capitals and regions that is a pretty stunning level of growth, given how high interest rates are and the cost of living pressures.''
Of the capital cities, Perth leads on the resilience front - surging 24.7pc through the interest rate rise cycle to April 2024 - while capital growth was tough in Sydney and property values fell in Hobart and Melbourne, making houses there relatively more affordable.
Mr Lawless said looking across the nation, home values have risen by only 2.8pc since the historic, two-year rate hike cycle began in April 2022, contrasting with the substantial 31.7pc rise in the two years before that.
But at a suburban level, higher interest rates have had little bearing on the market's performance in many areas, Mr Lawless said.
"Since the market bottomed out there's been 15 consecutive monthly increases in values nationally, but that performance is not indicative of the entire market,'' he said.
"Underneath the headline figure, there's significant diversity in the housing market's performance."
![CoreLogic research director Tim Lawless said WA'S extraordinary run of housing price growth risks a big correction down the track. CoreLogic research director Tim Lawless said WA'S extraordinary run of housing price growth risks a big correction down the track.](/images/transform/v1/crop/frm/79654223/1f4970c5-9c3a-46a2-86c0-2aeb10c5b9f0.jpg/r0_0_3556_3556_w1200_h678_fmax.jpg)
Top performing suburbs
Mr Lawless's latest reports show 18 of the nation's top 20 performing suburbs over the past two years were in WA, with the capital cities generally showing more resilience than the regions.
Across the greater Perth area, 97pc of suburbs were at a record high for dwelling values - the highest rate in the nation - while 60pc of suburbs in regional WA were at their peak.
Mr Lawless said the number of houses advertised for sale in regional WA over the past four weeks was tracking 19pc lower than at the same time last year and 48pc below the preceding five-year average.
On the demand side, the transaction rate was "massively" above the five-year average, he said.
"The number of home sales across WA is 43pc higher than the five-year average and the number of homes available is 48pc below the five-year average,'' Mr Lawless said.
"If you put it in that context it helps explain why house prices are not being affected by higher interest rates and cost of living pressures.
"People still need a place to call home, whether it's a rental or buying a house."
In regional WA prices are rising about $19,000 a month, and in Perth rising by about $14,000 a month.
"To delay your decision has a big financial consequence,'' Mr Lawless said.
"It doesn't matter where you look in the data, both rent and values are rising rapidly.
"It's a seller's market, if you are a buyer, you need to have all your ducks in a row.
"You need to have your finance ready, you can't negotiate all that much, you can't deliberate on a decision.
"Buyers must be feeling a real sense of urgency.''
Mr Lawless's analysis shows much of the national top 20 growth list comprises suburbs in Perth's fast-growing southeast corridor - led by Armadale, which rose by 60pc from April 2022.
It includes Brookdale, Camillo, Seville Grove, Maddington, Kelmscott, Cooloongup, Gosnells, Hayes and Hilbert.
Parmelia, in the southwest, Usher in Bunbury, and Ravenswood in Mandurah, also made the top 20 list.
WA is also well represented in the top 20 suburbs for the growth in unit values, with Armadale, Balga, Nollamara, Bayswater, Midland and Westminster all featuring.
Regionally, the growth list was topped by Bunbury (up 19.9pc), the Augusta/Margaret River/Busselton region and Manjimup, while the mining areas in the west and east Pilbara were relatively flat.
The Kimberley declined - possibly due to last year's cyclone-related flooding put a hold on pastoral sales.
"The market across WA is bucking the trend of softer values,'' Mr Lawless said.
"Even in the face of higher mortgage rates and reduced borrowing capacity buyers - including investors - have turned to Perth and Adelaide for their relative affordability, strong rental conditions and higher gross rental yields.
"The demand has outweighed supply, which has pushed values significantly higher over the past year.
"Perth, in particular, isn't showing any signs of slowing just yet and is approaching the cyclical highs seen during the pandemic when interest rates were at rock bottom.''
Interest rate rise cycle
With May marking the two-year anniversary of the start of the current cash rate rise cycle, Mr Lawless said it was a timely reminder interest rates were "only one factor that influences housing prices and activity''.
Unusual uncertainty about the cycle's next phase has grown within the Reserve Bank of Australia (RBA) and financial market circles over the past few months and may become more significant.
Mr Lawless said following the release of higher-than-expected inflation figures for the March quarter, a "higher-for-longer" mantra on rates has emerged within the financial sector.
"Financial markets are betting we will see a rate cut by April next year and most economists are tipping a cut by November,'' Mr Lawless said.
"From my perspective, it looks like the next movement from the RBA will be downwards, either late this year or early next year for the first rate cut.
"It is not going to be a rapid rate-cutting cycle, I think it will be a gradual process.
"The RBA is going to be very cautious about dropping rates, out of fear of re-igniting the inflation cycle and maybe re-igniting further house price growth as well."
Mr Lawless said upwards pressure on housing prices may seem surprising at face value, given the high cost of debt, stretched affordability and low consumer sentiment.
"But housing remains in short supply while demonstrated demand is continuing to track higher than a year ago and above the decade average for this time of the year,'' he said.
National house rise trends
Across Australia, the lowest growth suburbs were in regions that had probably experienced a natural correction after values overshot what might be considered fair value, Mr Lawless said.
Markets in places such as Richmond/Tweed area, in New South Wales, were also slowly recovering after severe weather events and widespread flooding in early 2022.
Hobart and Melbourne have the weakest capital city markets, where the impact of rising interest rates and a better balance between underlying supply and demand of housing stock had led to widespread falls in property values across most suburbs.
"Hobart and Canberra were buoyant with housing activity during the height of the pandemic but they've since faced a rise in listings, affordability constraints and subdued demographic conditions such as negative interstate migration levels,'' Mr Lawless said.
Melbourne's under-performance relative to other capital cities was due to several factors, he said.
"The city experienced softer housing market conditions through the pandemic, which coincided with a sharp drop off in net overseas and record low interstate migration rates,'' Mr Lawless said.
"More recently, this has been compounded by a raft of policy changes that have dampened buyer confidence despite surging overseas migration and a slowdown in the interstate migration flow.
"In contrast, no suburbs in Adelaide and only one suburb in Perth (Peppermint Grove, -0.6pc) have recorded a decline in values since April 2022."
Historical price trends
Overall, Mr Lawless said the nation's relatively small capital gain over the past two years was a legacy of the 7.5pc drop in national values seen during the early phase of the rate hike cycle, when the national index fell consistently from May 2022 to January 2023.
It has since had 15 consecutive monthly increases - including an 8.7pc rise in values over the past 12 months, adding about $62,400 to the median dwelling value.
"Since CoreLogic's national Home Value Index bottomed out in January 2023, values have risen every month to be 11.1pc higher,'' Mr Lawless said.
"The perception might be that property values are continually increasing, but we can't forget the short and very sharp downturn that occurred in the immediate aftermath of the first rate increases."
Mr Lawless said those following the market should keep in mind that WA's long, strong run of growth had come after a sustained period of weakness.
"If you look at the longer-term growth rates for regional WA, it has hit an annual growth rate over the past 10 years of 2.5pc, it is a real reminder the longer-term history of the market is one of weakness, followed by big growth,'' he said.
"It probably helps to explain why the market is so strong right now, if that weakness has a silver lining, it is in the sense that housing is relatively affordable.''
He said demand for housing in Australia remains extremely high in many areas - particularly due to the added pressure of record-high interstate migration levels, persistently tight rental conditions and an under-supply of dwellings.
"These figures show buyers are determined to get their foot in the door of home ownership irrespective of fate hikes and the rising cost of living,'' Mr Lawless said.
But outside of WA, the economic climate meant consumer sentiment was now very low, making it harder for people to make financial investment decisions.
"That flies in the face of what is happening in WA,'' Mr Lawless said.
"Thinking five years out, there eventually will be a supply response in WA and we will see more supply hit the market,'' he said.
"The longer we see housing prices rising at this pace, the higher the risk of a larger downturn when we eventually see a supply response.
"I think a lot of people in the marketplace are feeling a little bit nervous."
Mr Lawless said the cycle would not necessarily culminate in a mining boom-type peak.
"But I think we are seeing conditions a bit like in 2006 when prices rose by about 46pc in Perth in a 12-month period,'' he said.
"This is nothing like that, but it's fair to say the longer prices rise at this pace, the bigger the risk we will see a correction down the track."