If you're trying to buy a home in Perth, you'd better hope your pay packet has grown by about $16,500 since January. That's because you now need that much more to afford a typical mortgage in the western capital.
New research from Cotality, released Thursday, shows the annual household income required to service a loan on a median Perth house has jumped to $123,787 — up from $107,329 in January. Even units aren't a cheap escape: you'd need $86,740, up from $74,223.
That makes Perth the third-most expensive capital to buy into, behind only Sydney ($178,194 needed) and Brisbane ($139,077). And while the Reserve Bank paused rates on Tuesday, the damage from previous hikes is still hitting buyers hard.
"Rate hikes have significantly increased the challenges of servicing a mortgage across Australia," said Gerard Burg, Cotality's head of research. "In expanding markets like Brisbane and Perth, the compounding effect of rising property values and higher interest rates creates an aggressive income barrier for buyers, even at the lower end of the spectrum."
Perth's property values have soared 25.8 per cent over the past year — a chasm compared to Melbourne's 0.5 per cent. In May alone, Perth dwelling values rose 1.5 per cent to a record high, while Sydney fell 0.9 per cent and Melbourne dropped 0.8 per cent.
But the market is starting to lose steam. Cotality's report says Perth has "noticeably lost momentum."
James Limnios, managing director of Limnios Property Group, said the slowdown was already happening before the federal government's May budget changes to negative gearing. Labor limited the tax concession to new builds only, hoping to cool investor hotspots like Perth.
Limnios pointed to property transfer data from the March quarter: Perth saw 5,223 transfers, down from 6,724 the previous quarter. But eastern capitals fell much harder — Sydney dropped from 14,780 to 8,993, Melbourne from 19,065 to 11,233.
"Overall, the fall in transfers was the result of the market responding to housing affordability issues, which eventually would have led to a gradual correction in house prices," Limnios said. He called the government's approach a "sledgehammer" that could distort the market and hurt young buyers.
He also warned that buyers who used the 5 per cent deposit scheme in cities like Sydney could end up with homes worth less than their debt.
"Government intervention in the property market has too often led to distortions that can lead to unnecessary boom-bust cycles," Limnios said. In Perth, he said, the tax changes have had less impact because the WA economy remains strong and there's a severe supply shortage.
"However, the steady increase in established price listings means that sellers need to be more price conscious when setting the selling price of their home. Listing a house for sale and selling it within a few days is now a fast-fading memory."
For buyers hunting below the median, the lower quartile of Perth's market isn't much kinder. You'd need $104,534 for a home — a $14,400 jump from January — and $73,431 for a unit, up from $62,130.
So if you're a Perth renter hoping to buy, the dream is getting more expensive by the month. And with no rate cut in sight, that $16,500 gap isn't closing anytime soon.