Density, Demand and Delivery: The Changing Face of Perth’s Property Market

1. Macro backdrop: tight housing, rising rents, sustained demand

Perth is still running very hot by national standards:

• REIWA is forecasting around 10% house price growth for 2025, even after a ~25% jump in the year to Dec 2024.

• Rental markets are severely constrained, with vacancy rates around 0.7% at the end of 2024, keeping strong upward pressure on rents.

• In the City of Perth itself, rents have risen ~8% p.a. over five years, and even faster across Greater Perth (~13% p.a.). (Domain, 2025)

2. From houses to higher density: units & infill on the rise

One of the clearest trends: attached product is catching up.

- REIWA expects units to outperform houses for price growth in 2025 (forecast ~15% v ~10% for houses), after years of house-led growth. (REIWA, 2025)

- Local agencies are already pointing to strong demand for 2-bed, 2-bath units with parking, especially in infill corridors near rail and employment hubs.

Why it matters:

• For yield-focused investors, well-located mid-rise unit projects can now compete with house-and-land on both growth and rent.

• In many close-in suburbs, land values now justify higher density to make projects stack: townhouses, walk-up apartments, mixed-use over ground floor commercial.

Where to watch: inner-north (Mount Hawthorn, Leederville, Joondanna & surrounds), inner-east (Maylands–Bayswater–Morley), and key coastal strips where downsizers want lock-and-leave.

3. Planning & policy: R-Codes changes and granny-flat play

Planning reform is reshaping what you can build:

• WA’s Residential Design Codes (R-Codes) were updated in 2024/2025 to refine provisions for medium-density development and better housing diversity. (Department of Planning, Lands and Heritage, 2024).

• Since 10 April 2024, compliant granny flats (ancillary dwellings) can be built on any residential lot size without planning approval, if they meet setbacks and are under 70 m².

Investor angles:

• Infill sites with R-Code uplift (e.g. R40–R80 pockets) become more compelling for small-to-mid-scale developers doing townhouses, triplexes, and smaller apartment blocks.

• Existing single-res dwellings now have a more streamlined pathway for secondary dwellings, opening up:

  • Multi-income strategies (house + granny flat).

  • Rental supply at a lower build-cost than full subdivision.

The flip side: despite policy intent, Perth is behind its infill targets, and ABS data suggests WA is struggling to hit broader national housing goals. That supply gap is precisely what creates opportunity for nimble developers who can navigate planning and deliver product where councils and infrastructure allow.

4. METRONET and station-precinct development

Transport-oriented development is a major theme.

• METRONET will unlock ~8,000 hectares of land around new and existing stations for higher-density housing and mixed-use “precincts” (Property Council of Australia, 2024; Western Australian Planning Commission, 2024)..

• The State has already lodged applications for integrated housing around some station sites, including new townhouses and apartments on State-owned land.

Investor implications:

• Areas around new lines and upgraded stations (e.g. Ellenbrook line catchment, inner-east nodes) are positioned for above-average demand for units and townhouses.

• There is growing pressure—via industry bodies—to extend the “precinct” lens to more existing stations, which would further broaden the map of TOD opportunities.

If you’re active in acquisitions, mapping current and future METRONET nodes versus existing densities and zoning is a smart first screen.

5. Supply pipeline: approvals ticking up, but still lagging need

On the supply side:

• National ABS data shows total dwelling approvals rising (September 2025 saw a 12% monthly jump), with units leading the rebound in approvals.

• HIA figures suggest new home approvals are up ~13.9% nationally in 2024–25 versus the year prior. (Housing Industry Association, 2025)

But despite that uplift:

• Construction cost inflation, trade shortages and finance hurdles are still knocking marginal projects out of feasibility.

• Perth’s extremely low vacancy and strong rent growth tell you supply is not keeping pace with demand locally.

For an investor/developer, that combination—rising approvals but still chronic undersupply—is typically bullish for well-located, quality product that can actually reach completion.

6. Product types gaining traction

Across Perth, several product archetypes are standing out:

• Medium-density townhouses in established suburbs

  • Especially R30–R60 pockets near schools, parks, and transport.

  • Attractive to young families who are priced out of detached homes in blue-chip suburbs.

• Compact, well-specified units near rail and employment hubs

  • 2x2x1 layouts with good storage and balconies.

  • Strong appeal for renters and downsizers looking for low maintenance but decent amenity.

• Ancillary dwellings / dual-key arrangements

  • Enabled by R-Codes changes and demand for more flexible living arrangements.

• Build-to-rent and co-living concepts (emerging)

  • Still relatively nascent in Perth compared to the east coast, but attractive given yields and incredibly tight rental conditions.

7. Risks & what to watch

No market is a one-way bet. Key risks and watchpoints in Perth include:

• Affordability ceiling – after ~70% price growth over four years, even a strong market can hit a point where wage growth lags values.

• Interest rate / credit conditions – any tightening disproportionately hits off-the-plan buyers and marginal developers.

• Build-cost volatility – while material cost inflation has eased from its peak, labour constraints remain a live issue on some trades.

• Planning lag – policy is becoming more pro-density, but local politics and approvals processes can still delay projects, particularly in established suburbs.

Mitigation for investors:

• Focus on locations with clear structural drivers: transport investment, employment, universities/health, or strong lifestyle pull.

• Stress-test feasibilities with conservative build costs and timelines.

• Prefer projects with multiple exit strategies (sell-down, retain as rentals, or partial sell/retain) rather than single-path outcomes.

8. Strategic takeaways for an investor

If you’re allocating capital into Perth development over the next 3–5 years, the big themes are:

• Chronic undersupply + strong migration + low vacancy

  • supports both development margins and post-completion yield.

• Policy is nudging toward more density

  • R-Codes updates, granny-flat reforms and METRONET precinct planning are all pushing in the same direction.

• Units and medium-density product are no longer the poor cousins

  • price growth in units set to outpace houses, especially around transport and amenity-rich infill areas.

• Execution, not just site selection, is the differentiator

  • with rising approvals but constrained actual delivery, investors who can solve planning, cost and delivery risk will capture the upside.

Sources

• Australian Bureau of Statistics. (2025). Building approvals, Australia – September 2025. ABS Catalogue No. 8731.0. https://www.abs.gov.au

• Housing Industry Association. (2025). New home building approvals increase by 13.9% year-on-year. HIA Media Release. https://hia.com.au

• Property Council of Australia. (2024). METRONET precincts and transit-oriented development in Western Australia. https://propertycouncil.com.au

• Real Estate Institute of Western Australia (REIWA). (2024). Perth housing market forecast 2025. https://reiwa.com.au

• Real Estate Institute of Western Australia (REIWA). (2025). Perth rental market report – Q4 2024. https://reiwa.com.au

• State Government of Western Australia – Department of Planning, Lands and Heritage. (2024). Residential Design Codes (R-Codes) – Medium Density Housing Code updates. https://www.wa.gov.au

• State Government of Western Australia – Department of Planning, Lands and Heritage. (2024, April 10). Granny flat planning reform: Ancillary dwellings on any residential lot without planning approval. https://www.wa.gov.au

• Urban Development Institute of Australia (WA Division). (2025). Infill targets and medium-density housing progress report. https://udiawa.com.au

• Western Australian Planning Commission. (2024). METRONET precinct planning program. https://www.wa.gov.au

• Western Australian Property Market Outlook. (2025). Greater Perth rental and house price trends. https://www.domain.com.au