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There’s still one city where property prices haven’t gone crazy

A short stroll from some of Perth’s most desired beaches, another happy property vendor is closing in on a bumper sale.

A couple of 306 square metre blocks in Swanbourne, a coastal suburb that neighbours exclusive Cottesloe, have just gone under offer for about $2 million a pop. Although an eye-watering sum for many hopeful buyers battling the property boom, it’s another relative bargain for those willing to brave Western Australia’s prolonged closed border and distance to the east coast.

“That’s huge money for Perth,” says Jonathan Lane, a property consultant at the selling agency, Central Estate Agents. “Yes, they’re cracking blocks in a highly sought-after street, but they don’t have ocean views. Still, it’s not even close to Sydney or Melbourne money for equivalent properties.”

Perth dwelling values surged 13.1 per cent last year, a strong result for the bruised market but still the worst performing capital city and well below the 22 per cent national gain. According to CoreLogic data provided to AFR Weekend, it only helped recover prior losses since 2014, after the bust of the mining boom, with Perth registering the same 13.1 per cent growth over the last decade.

In contrast, Sydney dwelling values rose 25.3 per cent in the past year and 110 per cent over 10 years. In the city’s prized eastern suburbs, growth was even stronger over one and 10 years, up 27.4 per cent and 128 per cent, respectively, with houses outperforming units as the pandemic put a premium on extra space.

Buyers eyeing off a house in Bellevue Hill, for example, are now looking at a median price of $8.6 million after the past year’s 33 per cent rise. Down the road at the beach in Bondi it’s $4.4 million, or $3.6 million in the more inner-city Paddington.

It is a similar, albeit less dramatic, story in Melbourne, where dwelling values have leapt 73 per cent in the past decade. In Brisbane – a common hunting ground for Sydney and Melbourne buyers priced out of their home markets – dwellings are up 58 per cent over the decade, with house prices surging 71 per cent.

But across the Nullarbor in Perth, buyers can still snap up a cheaper house in similarly desired suburbs, about the equivalent distance to the city and beach, often on bigger blocks, particularly compared to Sydney.

In beachside Cottesloe, where several of Perth’s senior business figures reside, the median house value has risen to $2.5 million, up 18 per cent in the past year or just 26 per cent over a decade. In Nedlands on Perth’s Swan River just a short drive to the CBD, it is $1.9 million, while in the more inner-city western suburbs of Shenton Park and Subiaco, the median house price is about $1.5 million. “It is staggering,” says Eliza Owen, CoreLogic’s head of residential research Australia. “Especially so now that remote working has become more normalised.“ Ms Owen, however, says Perth’s housing market has always been “aggressively cyclical” tied to the fortunes of the mining industry, noting the roughly 20 per cent slump in the six years leading up to COVID-19. It also lacks Sydney and Melbourne’s status as global cities, plus their larger populations and more diverse employment opportunities.

Ms Owens says Perth’s distance to the eastern states means it is harder for Sydney and Melbourne buyers to take advantage of the pricing arbitrage compared with buying in closer, cheaper regional areas, which has been a trend during the pandemic.

“I absolutely love Sydney and there are lifestyle trade-offs and pros and cons in every state that you have to weigh up,” says Mr Lane, who bought in Perth’s western suburbs in 2020 after returning to his hometown following 15 years in Sydney. “But compared to what you buy for a similar amount of money in Sydney to Perth, it’s a bit of a no-brainer. We looked around in Sydney a bit, and you get a bit excited, but ultimately, it can be a bit deflating when you realise where and what you’ll be living in for the amount you have to pay.” Nedlands-focused agent Michelle Kerr of Duet Property Group says about 30 per cent of buyers are coming from the eastern states, despite WA’s closed border. “It is very, very strong,” she told podcast The Perth Property Show this month, agreeing the rise of remote working was key. “These people are making an enormous capital investment ... site unseen most of the time.“

Mr Lane says Premier Mark McGowan’s scrapping of the state’s reopening has created uncertainty and will affect Perth’s appeal in the short term, but tipped demand would return once the borders and the city’s price recovery would roll on. ”It’s still had a good run in terms of health outcomes through COVID-19 and people see it as a great lifestyle choice,” he says, adding this was particularly so for young families, particularly WA ex-pats. “I think people are appreciating things like putting down some roots, being around family and having more space given the rise of working from home.”

Perth property magnate Nigel Satterley last week told AFR Weekend the market would continue its “steady recovery” and remain “sound”, which was needed after years of little or negative growth in parts of the city. “Overall, supply is still down, buyer demand has been strong. All these properties are getting snapped up, almost as you refresh your browser, which is sort of reminiscent of what Sydney was like when it took off from around 2012,” Mr Lane adds. “And it applies to the rental market too. Tenants are offering well above advertised prices, six months in advance, sight unseen, because they’re so desperate to get it.”

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