Perth property prices are expected to rise between 8% and 11% over the next year, according to real estate insights platform PropTrack.
This forecast follows a 19% increase in the past year, marking the largest annual growth rate among Australia's capital cities.
Low stock, high demand
PropTrack economic researcher Cameron Kusher attributed the price surge to a combination of limited housing stock and high demand.
"There's not a lot of new housing being built and there's a very low amount of stock available for sale in Perth," Kusher told the ABC.
He added that WA's population growth exacerbated the shortage, with fewer people leaving the state and more people moving in.
Currently, there are about 23% fewer houses on the market compared to the same time last year, a decline that is the most significant among Australia's major cities.
This scarcity has been compounded by rising interest rates and increasing material costs, which have hindered new construction projects.
"Margins have been crushed because material and construction costs have gone up so much," Kusher noted.
The tight housing market has made it increasingly difficult for prospective buyers.
Many opt to purchase existing properties rather than new builds due to the higher costs associated with new construction.
"People, where they can, are preferring to buy something that already exists rather than something new, because that premium is just much larger than it usually is," Kusher explained.
Tax cuts will further stimulate market
While the housing crisis in Perth is severe, Kusher pointed out that this issue is not unique to Western Australia but a challenge right across the country because of high interest rates impeding development.
Despite the recent price hikes, Perth remains more affordable than other Australian cities such as Adelaide, Brisbane, Melbourne and Sydney. Kusher explained that Perth was merely catching up after more than a decade of minimal property growth.
The upcoming Federal Government stage 3 tax cuts, along with a potential reduction in interest rates in 2025, could further stimulate the housing market.
"The tax cuts will improve people's borrowing capacity. While you won't see the effect immediately, over the next 12 months, we'll see the impact of that," Kusher predicted.