Labour shortages and construction cost increases are making projects unviable for developers.
WA property developers have shelved 35 per cent of approved apartment projects and held back an additional $2.2 billion of pre-approved developments, a recent Property Council report reveals.
The Property Council of Australia surveyed 21 apartment developers about their response to the skills shortages created during the pandemic, highlighting severe pipeline disruptions and escalating construction costs.
More than one third (35 per cent) of apartments that have received development approval have been held back until developers can get more certainty over labour supply and construction costs.
An additional $2.2 billion of apartment developments have been held back during COVID.
This casts doubt over the construction of about 10,000 apartments in WA.
Subiaco’s OP Properties has put several projects on hold in the past 18 months, including a Como development that failed to come to fruition.
The group’s director Luke Parker said he earmarked a site to build an apartment complex in the suburb, but rapidly escalating construction costs rendered the project unviable in the space of a few months.
“It [became] unviable to the extent that if we got land for free it still would not have been viable,” he told Business News.
“Early last year we started hearing reports of cost increases but it wasn’t until mid to late in the year we had a lot more tenders come in and it become obvious this wasn’t a one off, this was an entrenched price increase.”
Mr Parker said the cost to build the Como development blew out by 25 per cent in 2021.
“A number of developers have pulled back and thousands that have been ready to commence construction have been deffered.
“This isn’t the case of developers needing to accept lower profits; the projects are at a complete loss to begin with.”
OP Properties also delayed its Montreal Commons project in Fremantle by six months because of the cost pressures created during COVID.
Property Council of Australia WA Division executive director Sandra Brewer said these supply constraints made housing less affordable, with the median house price within 10 kilometres of the CBD at about $1 million.
“Swift action is required to avert a future housing and affordability crisis,” she said.
"Shutting our borders was necessary but switching off population growth – one of Australia's biggest economic engines – has come at a cost.
"We have seen housing affordability erode over the last 12 months.”
Mr Parker said it would take more than an open border to alleviate the pressure on the construction industry.
He said it was crucial for government and developers to work together to ensure the pipeline of work resumed as quickly as possible.
A state government spokesman said lower TAFE fees had attracted more apprentices and training for local construction workers had been fast-tracked.
“Our Government has been working directly with industries to support efforts to increase the capability of their workforces and produce more skilled workers to meet increasing industry demand," he said.
