Perth Property and Rental Affordability Faces Ongoing Pressure
By Brett White, Managing Director – RE/MAX Extreme
As we step into 2025, property affordability continues to challenge home buyers and renters across Perth, especially in the fast-growing northern suburbs. Despite Western Australia remaining more affordable than many other parts of the country, strong price growth in the Perth market is placing increasing pressure on household budgets.
Despite the decline in affordability, Perth remains one of the most accessible property markets among Australia’s major capitals. Brett White from RE/MAX highlights that WA continues to offer great value, with property prices still significantly lower than Sydney and Melbourne. While home loan repayments have risen due to strong price growth, WA remains the most affordable state, with only the territories ranking higher in affordability. Additionally, Perth’s median house price growth reflects the ongoing demand for property, making it a strong investment destination.
Another key factor supporting Perth’s housing market is WA’s high average income levels. With a median weekly family income of $2,675—the second highest in the nation—West Australians are in a better position to manage mortgage commitments than buyers in other states. Mortgage repayments in WA also remain lower than the national average, providing relative stability for homeowners. While affordability has tightened, first-home buyers and investors continue to be active, capitalizing on Perth’s long-term growth prospects. As the market evolves, Perth remains a compelling choice for buyers looking for affordability and strong economic fundamentals.
Housing Affordability Tightens in Perth
Recent data shows that in the December 2024 quarter, the portion of income required to service a mortgage in WA climbed to 42.5%. That’s up 2.5 percentage points in just three months and 5.6 points higher than a year ago. With the average family income in WA at $2,675 per week and average monthly loan repayments now hitting $4,931, the affordability squeeze is being felt by many Perth families.
The biggest driver of this shift is rising property prices, particularly in the Perth metropolitan area. Over the past year, Perth’s median house price surged by 23.3%, driven by limited housing supply, strong demand, and steady population growth. This is especially true in sought-after pockets of the northern suburbs, where we’ve seen exceptional competition among buyers.
Naturally, this has led to an increase in average loan sizes. In WA, the average home loan grew 7.3% over the December quarter and nearly 20% over the year, reaching $598,771.
Although the Reserve Bank’s interest rate cut in February is likely to offer some relief, that benefit could be offset if home prices continue to climb.
Perth Still Holds a Relative Affordability Advantage
Even with rising prices, Perth remains one of the more accessible housing markets in the country. Only the ACT and Northern Territory recorded better affordability results. In contrast, states like New South Wales saw mortgage repayments consume nearly 60% of household income.
Buyer Demand Holds Steady
Despite tightening affordability, we’re still seeing strong buyer interest in Perth. The number of loans to owner-occupiers rose 5.7% in the December quarter, reaching 10,659. While that’s a slight drop from the same time last year, it shows that Perth buyers remain active.
The shift we are seeing is that buyers are becoming more mindful. With the sharp rise in home values, many are sticking closer to their budgets and looking for value, particularly in Perth’s northern corridors.
WA’s advantage comes from relatively strong household incomes and lower loan repayments compared to the national average. With higher earnings and smaller average mortgage payments, local buyers are better placed than many of their eastern states counterparts.
First Home Buyers Continue to Engage
First home buyers are still playing an important role in Perth’s market, making up 36.1% of all owner-occupier loans. Over the quarter, first-home-buyer loan numbers grew by 3.6%, though that figure is nearly 10% lower than the same period in 2023.
The average loan size for first-time buyers in WA climbed to $497,508 — up 3.2% for the quarter and almost 14% year-on-year — showing that entry-level buyers are stretching further to secure a foothold in the market.
Rental Affordability Remains a Concern
On the rental front, affordability continues to be a challenge in Perth. Renters are now spending 24.3% of their household income on rent — a slight rise from the previous quarter and nearly 2 percentage points more than a year earlier.
However, there are signs of improvement. Rental price growth appears to be stabilising as more rental stock comes onto the market. The vacancy rate, which was previously sitting at record lows, has started to increase, allowing some pressure to ease.
WA currently sits in the middle of the pack nationwide for rental affordability, tied with the Northern Territory. Queensland, Victoria and the ACT remain slightly more affordable, while renters in New South Wales are still facing the toughest conditions.
Final Thoughts
Affordability remains a key issue in Perth, particularly for first-home buyers and renters in the northern suburbs. But with Perth still outperforming other capitals in terms of value and economic resilience, the outlook remains positive.
Buyers are becoming more strategic and calculated in their decisions, and sellers are benefiting from a strong, demand-driven market. As interest rates gradually ease and housing supply improves, we expect the market to remain active but more balanced in 2025.
Whether you’re looking to buy, sell, or invest in Perth’s dynamic market, sound advice and a tailored strategy can make all the difference. At RE/MAX Extreme, we’re here to guide you every step of the way.
If you’d like to discuss your next move or need help navigating today’s market, feel free to get in touch.
Source: REIWA (Real Estate Institute of Western Australia)