East coast investors creating two-speed Perth property market

The latest data from Lendi reveals that 37 per cent of all property transactions in the Perth metro area are being made by buyers from Australia’s east coast.

This surge in interstate investment is reshaping Perth’s housing market, potentially creating a two-tier system, where some areas experience unsustainable price growth that will feel the pain when the investment money dries up.

A two-tier property market occurs when certain suburbs experience rapid price increases driven by external demand, while others grow at a more sustainable pace through demand from local buyers.

In Perth, the influx of east coast investors—many attracted by the city’s relative affordability compared to Sydney and Melbourne—could be driving up prices in selected hotspots.

The problem? Many of these investors are chasing short-term capital gains rather than focusing on long-term market fundamentals like local job growth, population increases, and infrastructure development.

This means some suburbs may experience artificially inflated demand, which could reverse if investor sentiment shifts.

The investor trap: buying in unstable property markets

Perth has long been known for its cyclical property market, often dictated by mining booms and economic shifts. However, interstate investment can create temporary growth in suburbs that may not have long-term resilience.

Investors, lured by recent price surges and strong rental yields, could find themselves in trouble if:

• local demand doesn’t match investor-driven growth; if an area is propped up primarily by out-of-state buyers rather than local owner-occupiers, prices could stagnate or decline once investor demand cools.
• rental markets become oversupplied; a flood of investor-owned properties could lead to increased rental supply, forcing rents down and impacting investor returns.
• exit strategies become difficult; investors banking on capital growth may find it hard to offload properties if local buyers aren’t willing to pay inflated prices.

While some Perth suburbs have solid fundamentals—strong population growth, infrastructure spending, and employment opportunities—others are growing due to investor hype.

Investors need to be wary of areas that:

• have high investor concentration but low local owner-occupier demand, which often occurs in areas with a glut of off the plan units and new units being built
• lack major long-term infrastructure projects or employment hubs
• are experiencing rapid price growth without clear economic drivers, such as regional pockets.

For those considering investing in Perth, it’s crucial to look beyond short-term price trends and focus on sustainability.

Some key WA investment strategies

It’s not just local property experts seeing this trend, many lenders are starting to get concerned with Perth.

Some are starting to shy away from markets that perceivably could be at risk.

Lenders have drawn on past experiences where they have been caught out in previous booms that saw investors superficially driving up new unit prices and jumping in to mining booms.

Many banks now have strict policies around lending in two-tier markets. To avoid this trap they rely heavily on their qualified valuers on the ground to identify this trend for them, coupled with data and analytics.

Once they have too much exposure, they will blacklist the postcode and not lend there until their exposure is decreased to an acceptable level.

Investors should be wary of this, because you may buy before the lenders blacklist an area and then find out that you have trouble selling due to changes in lending policies, consequently limiting your buyers’ access to funds on resale.

Perth’s property market is at an interesting crossroads.

While east coast investors are fuelling strong short-term gains in some areas, this growth isn’t guaranteed to last.

A two-tier market could emerge, leaving some investors exposed to sharp corrections when the hype fades.

For those looking to invest in Perth, the key is to think long-term—avoid speculative buying and focus on areas with genuine, sustainable growth drivers.

Those who chase quick gains in investor-driven hotspots may find themselves caught in the next property downturn.