A remarkable population surge in one state is helping drive up its home prices up more than anywhere else in the country, but it's not the only factor at play.
In the past few years, Australia's strong population growth has played a role in driving up home prices nationwide.
According to new national, state and territory population data from the Australian Bureau of Statistics, Australia's population grew by 1.8% from September 2023 to September 2024.
While population growth in Victoria and Queensland exceeded the national level, Western Australia had the highest growth among all states.
This was also evident at a capital city level with Perth outpacing all other cities in terms of annual population growth, up 3.2% from June 2023 to June 2024.
Net overseas migration and net interstate migration both contributed to this surge, with Western Australia trailing only Queensland in interstate migration figures.
The increasing population is helping to stimulate economic growth in the state, but has also had an impact on housing demand and home prices overall.
This is evident when we look at the annual home price growth in Perth and Regional WA. Compared to all other cities and regions across the country, prices grew the most at 11.5% and 11.9% respectively.
One factor which has driven migration to Western Australian is the relative price of homes in the state. Median home values have been below most of our larger states in recent years.
In late 2021, following the third highest peak in prices historically, the median value of a home in Perth was still just $514,000 while median Sydney, Melbourne and Brisbane homes were valued at $988,000, $782,000 and $585,000 respectively.
Homes in Regional WA also had a median value below every regional area except Regional SA.
Although the state has experienced immense growth in home prices since 2021 as a result of affordability among other factors such as employment opportunities, homes continue to cost less than most states.
Strong population growth may be driving up home prices in Western Australia, however, it is also important to consider the effect supply can have on price.
The shortage in the number of homes being built has been the most prominent in WA, according to new completions data.
Relative to population growth, there is currently a 52% shortfall in new homes. This is well above the national shortfall of 28% and points to a bigger issue at hand - that the state is grappling with a more significant housing challenge than the country as a whole.
Demand for housing in WA has been steadily increasing due to population growth and a surge in investor activity, yet supply continues to fall short of targets. If these trends persist, housing prices are likely to rise further.
