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WA Property Market Update December 2023 & Year in Review

As the year 2023 draws to a close, and with a welcome announcement of no interest rate changes from the RBA in December, it’s time to reflect on the dynamics of the Western Australian property market. Let’s have one last look at the WA Property Market for 2023, review the year, and look ahead to the New Year.

WA Residential Property Market Update December 2023

The year 2023 has had notable twists and turns throughout, marked by numerous challenges and opportunities. The landscape has been shaped by factors such as rising interest rates, inflation, and cost of living pressures, all playing a significant role in housing affordability. These elements coincided with a period of low housing supply, soaring construction costs, and population growth in Western Australia.

Predictions made earlier in the year largely materialised, especially regarding the impact of increased migration on the rental and purchase markets. Relative housing affordability in Western Australia remained a key driver, attracting attention from overseas and interstate buyers and investors. The residential market saw a significant surge in demand, leading to a further decline in the rental vacancy rate to an average of 0.44% in the metropolitan area, well below the balanced market benchmark of 2.5 to 3.5%.

The shortage of available properties, less than 5000 against the “ideal” figure of 13,000, has intensified the market. Government initiatives like the delay in implementing the Medium Density Code and the formation of a Housing Supply Unit aim to alleviate these challenges. However, new construction faced headwinds due to rising costs and a slowdown in construction, as indicated by the 10.5% rise in new land costs and a decline in the number of lots available.

Interest rates, a central topic nationwide, saw significant hikes, reaching a 12-year high of 4.35%. Despite these increases, Western Australia maintains its status as one of the most affordable states for home purchases, with a less pronounced impact on consumer confidence compared to other regions.

Overall, analysis of market dynamics and trends reveals a complex and evolving WA property market as we see out the year. The state’s population growth, driven by migration and the demand for skilled workers, continues to increase pressure on the real estate market, both in sales and rentals.

WA Retail Property Market Update December 2023

The retail property market in Western Australia began 2023 at a critical juncture. The combination of successive interest rate rises and high inflation posed questions about the impact on investor and consumer confidence. As disposable income came under pressure, consumer spending habits shifted, directly affecting the retail sector. Despite these challenges, the demand for retail assets from buyers in eastern states remained robust, drawn by attractive yields compared to their local markets.

Notable transactions throughout the year included the largest retail transaction in two years, the sale of Midland Gate Shopping Centre. These type of deals underscored the continued investor interest in retail properties with strong fundamentals, such as long lease terms and non-discretionary tenant mixes like Woolworths and Coles.

Developments like the expansion of Westfield Booragoon and refurbishment of Karrinyup Shopping Centre reflect a shift towards creating multifaceted retail experiences. However, retail leasing in Perth’s CBD struggled, impacted by the rise in remote working and reduced foot traffic.

Looking at 2023 as a whole, the retail property market presented a complex picture, influenced by macroeconomic factors and changing consumer behaviours. The outlook remains cautious, with potential challenges ahead as we move into 2024.

Looking Ahead

As we anticipate what might happen in 2024, the Western Australian property market will doubtless have a number of challenges to overcome. Interest rates, while they’ve been on hold this past month, may have further to rise depending on the prevailing economic conditions early in the New Year. The residential sector, buoyed by sustained demand and strategic government initiatives, faces the challenge of balancing affordability with supply constraints. The retail sector, while resilient in many areas, must navigate the evolving consumer landscape and economic headwinds. Looking ahead, it’s clear that adaptability and strategic planning will be key in navigating the complexities of the property market in Western Australia in 2024.

If you’re ready to make 2024 the year that you get your home loans in order, or launch your property portfolio, reach out to the MP+ Finance team via our website, or call us on 08 9325 2411 (Perth) or 08 9301 2200 (Joondalup).

Data from: HTW Month in Review December 2023

written by:

Paul has over 35 years of experience in finding financial solutions for homebuyers, investors and business owners.
A licensed broker and member of the Mortgage & Finance Association of Australia (MFAA), Paul’s extensive experience includes 20 years with a major bank, seven of which were as commercial banking manager.
Paul delivers a holistic financial solutions to achieve the best possible outcome for a client’s personal or commercial lending needs. Paul also provides a comprehensive financial consultancy to business owners on commercial, equipment and invoice finance.

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