Real Estate in Australia: Perth Home Prices Surge on the Back of Defence Investments

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Perth is set to receive around $25 billion ($16.4 billion) for the modernisation of shipbuilding and naval facilities, Bloomberg reports, citing Ray White. The investment is expected to create thousands of jobs and further boost demand for housing, pushing prices higher.

Aukus defence alliance

The funding will be allocated under the Aukus defence partnership between Australia, the United States and the United Kingdom. The agreement was launched in 2021 to counter China and focuses on the transfer of nuclear-powered submarines as well as the joint development of a new generation of submarines in the 2040s. After Donald Trump returned to the White House, the future of the pact was questioned, but on October 20 he confirmed his support for the project. Australia has already made an advance payment and continues to expand defence spending, despite ongoing domestic debates over sovereignty.

The Australian government has already allocated AUD 12 billion for the development of the Henderson Defence Precinct, the first stage of a large-scale defence programme linked to the future Aukus fleet. The funds will be used to build new shipbuilding capacity, infrastructure for servicing surface vessels and docks for future nuclear submarines. The project is expected to generate around 10,000 construction jobs and a further 3,000 positions in units associated with the submarine base, while also expanding opportunities for local businesses, particularly in engineering, logistics and services.

Henderson is expected to become a key industrial hub supporting a long-term shipbuilding and fleet modernisation programme. Additional funding will underpin the production of landing craft for the army and future general-purpose frigates once shipbuilding capacity has been consolidated. The government stresses that this first tranche is part of a broader investment programme that will unfold over decades.

Housing market price dynamics

Experts note that these projects will not only create new opportunities but also intensify pressure on a property market where demand has long outstripped supply. Home prices in Perth are already rising at an accelerated pace amid population growth, limited supply and a resilient local economy. Western Australia, home to the country’s mining industry, has experienced several resource booms over recent decades.

According to Cotality, housing prices in Perth rose by 7.4% over the past three months, the fastest increase among Australia’s major cities. Over five years, prices have climbed by 87.2%, slightly outpacing Brisbane. In Sydney, which remains the country’s most expensive market, prices have risen by 37.4% since 2020. Ray White chief economist Nerida Conisbee says Aukus is unlikely to have an impact comparable to a mining boom, but it will add another layer of demand to an already tight market. The situation in Perth remains unchanged: demand continues to grow, supply lags behind, and prices keep responding.

Reuters writes that a 75-basis-point rate cut by the Reserve Bank in 2025 has reignited buyer activity and pushed the median home price to a record AUD 872,538 ($575,000) in October. Experts surveyed by the agency expect prices to rise by 8% in 2025 and by 6.9% in 2026. Sydney, Melbourne, Adelaide, Brisbane and Perth are all forecast to see growth of 5–7% next year. The main driver remains a shortage of supply, particularly in the affordable and entry-level segments.

The median value of property in Australia is now almost eight times the average annual income. Buyers are constrained by weak wage growth, high rents and tight lending conditions. A federal government scheme allowing home purchases with a 5% deposit partially eases the situation, but at the same time fuels demand without addressing the supply deficit.

Risks for investors

Australia’s property market is not the most attractive destination for generating income. Risks have increased amid a two-year ban on foreign buyers purchasing established homes. The moratorium applies to all completed and previously occupied properties, meaning non-residents can only buy new homes or land with mandatory development, and only with FIRB approval. Additional financial barriers are created by surcharges on stamp duty and land tax for foreign buyers. In some states, the stamp duty surcharge reaches 8–9%, significantly increasing entry costs and reducing investment returns.

A significant risk is also linked to delays in implementing the national plan to build 1.2 million homes by 2030 due to high costs, labour shortages and lengthy project timelines. According to the Housing Industry Association, even this volume will not be sufficient to meet growing demand. The shortage of new supply increases political pressure on the market, and any new measures to improve housing affordability may include additional restrictions for investors.