Why Sydney’s Cooling Property Market Does Not Mean Perth Will Crash

The latest footage from Sydney’s auction market tells a very different story to the one Australians became used to during the pandemic property boom. Auctioneers are working harder. Buyers are hesitating. Investors are disappearing. Sellers are adjusting expectations. Properties are being passed in. Even experienced agents are openly acknowledging softer conditions.

For many Australians watching from Perth, the obvious question is this: Will the same thing happen here?

The answer is more nuanced than many headlines suggest.

While Perth will not be immune to higher interest rates or changing investor sentiment, the WA market is operating from a fundamentally different position to Sydney and Melbourne. In fact, some of the very forces now slowing the eastern states may continue to support Perth over the medium term.

Sydney’s Problem: Affordability Saturation

The Sydney market shown in the transcript reflects what happens when affordability reaches its practical limits.

For years, Sydney property prices were supported by:

• ultra-low interest rates,
• aggressive investor participation,
• tax incentives,
• and expectations of endless capital growth.

But eventually, borrowing capacity becomes exhausted.

• When interest rates rise:
• monthly repayments increase,
• bank serviceability shrinks,
• and buyers simply cannot borrow the same amounts.

That is exactly what the auction footage reveals.

First-home buyers are stretching to their absolute limit. Auctioneers are struggling to generate momentum. Investors are absent. Sellers are negotiating after failed auctions. Importantly, this is not just about economics. It is about psychology.

Property markets are confidence-driven.

In rising markets:

• buyers fear missing out,
• auctions create urgency,
• and sellers control negotiations.

In weakening markets:

• buyers become patient,
• vendors chase the market down,
• and urgency disappears.

Once buyers believe there may be a better deal next month, the entire dynamic changes.

Perth Is Starting from a Very Different Position

Perth’s market structure remains fundamentally different from Sydney and Melbourne in several key ways.

1. Perth Still Has Relative Affordability

Even after strong growth over recent years, Perth remains significantly cheaper than Sydney.

That matters because Perth buyers:

• generally, carry smaller mortgages,
• face lower repayment stress,
• and still perceive Perth property as relatively good value.

The affordability buffer is critical. Sydney buyers often entered the recent cycle carrying enormous debt levels relative to income. Perth has not yet reached the same level of financial saturation.

As a result, Perth is typically more resilient during the early stages of higher-rate environments.

2. Perth Has Genuine Supply Constraints

Much of Perth’s recent growth has been driven by a genuine imbalance between supply and demand. Listings remain relatively tight. Vacancy rates remain low. Population growth has increased. Construction costs and labour shortages have slowed the delivery of new housing stock. This is important because supply shortages can continue supporting prices even when borrowing conditions become more difficult.

Sydney and Melbourne are largely dealing with affordability fatigue. Perth is still dealing with undersupply. That does not mean prices rise forever, but it does mean Perth’s cycle may continue behaving differently for longer than many expect.

3. Investor Behaviour May Shift Toward Perth

One of the most important aspects of the transcript is the discussion around investor tax changes and the reduction in investor participation. Historically, many eastern states investors accepted poor rental yields because they were relying on long-term capital gains.

If investors become more cautious about speculative growth, many may increasingly focus on:

• stronger rental returns,
• lower holding costs,
• and better cash flow.

That potentially benefits Perth. Compared with Sydney and Melbourne, Perth still offers:

• higher gross rental yields,
• lower entry prices,
• and more manageable holding costs.

In a higher-rate environment, yield becomes more important. That changes investment behaviour.

Perth Will Still Slow — But Probably Differently

None of this means Perth is immune.

All property markets are affected by:

• interest rates,
• lending standards,
• consumer confidence,
• and economic conditions.

Perth is already showing some signs of transition:

• buyers becoming more selective,
• more negotiation occurring,
• and less emotional “fear of missing out” behaviour.

The “everything goes up” phase rarely lasts forever. Instead, Perth is likely moving into a more mature stage of the cycle where:

• quality assets outperform,
• location matters more,
• and buyers become increasingly discerning.

That is a normal market evolution.

Which Perth Properties May Perform Best?

As affordability pressures gradually build, several segments of the Perth market may continue to perform relatively well.

Affordable Family Homes

Well-located homes in affordable and middle-ring suburbs are likely to remain highly competitive due to ongoing supply shortages and family demand.

Units and Townhouses

Perth apartments and townhouses remain comparatively affordable by national standards.

As detached housing becomes more expensive, many buyers are likely to shift toward:

• villas,
• duplexes,
• townhouses,
• and boutique apartment developments.

This segment may outperform expectations over coming years.

High-Quality Scarcity Assets

Properties with genuine scarcity value like character homes, premium lifestyle locations, quality school catchments and tightly held suburbs tend to remain more resilient when markets become selective.

Where Perth May Become More Vulnerable

The upper end of the market is usually the first area to soften when sentiment weakens.

Prestige property depends heavily on:

• confidence,
• business conditions,
• liquidity,
• and discretionary spending.

Luxury coastal homes, lifestyle acreage and premium architectural properties may experience:

• longer selling times,
• more negotiation,
• and greater price volatility.

That is historically common in Perth market cycles.

The Bigger Picture

The eastern states auction footage is an important reminder that Australian property markets are deeply influenced by:

• credit conditions,
• investor psychology,
• and interest rates.

Housing shortages matter over the long term. However, in the short and medium term, borrowing power and confidence often drive pricing more than anything else. For Perth, the most likely outcome is not a dramatic collapse.

More likely is a transition from:

An extremely hot market, to a still-strong but more selective market.

That is a very different scenario. The boom phase may moderate. But Perth’s relative affordability, supply constraints and stronger rental fundamentals continue to provide support that Sydney and Melbourne increasingly lack.

Andrew Huggins is Principal of Ray White Urban Springs, the top real estate agent in the City of Belmont for over 20 years. He writes about Perth property trends, WA real estate insights, Australian housing supply and demand, and long-term investment strategy.