Property analysts are predicting a significant rise in Perth’s residential apartment prices as supply falls on the back of rising construction costs and a subsequent reluctance on behalf of developers to build.
Property analysts are predicting a significant rise in Perth’s residential apartment prices as supply falls on the back of rising construction costs and a subsequent reluctance on behalf of developers to build.
This situation is in marked contrast to the eastern states, where oversupply and lack of affordability are the most pressing issues for the sector.
Perth’s residential apartment market remains strong, but building delays are starting to become apparent.
While several sites have development approval for multi-storey apartment buildings, developers are holding off while purchase prices catch up with the significant increase in construction costs.
Pro Property principal Brett Wilkins told WA Business News that, while apartment prices had experienced 10 per cent growth over the past six months, construction prices had increased significantly faster than sale prices.
“There are no shortage of approved plans around, but most won’t get up because of construction costs,” Mr Wilkins said.
Mr Wilkins predicted an increase in residential apartment prices of 15 to 30 per cent in the next year.
“There are no major vacancies in any apartment buildings right now and Perth just can’t remain retain the currently level of affordability with such strong growth,” he said.
The shift to single-person households indicated in ABS statistics released last week would only exacerbate the pressure on the apartment market, Mr Wilkins said.
Pro Property recently sought tenants and buyers for Beaufort Central, a 136-apartment complex on Beaufort Street, Northbridge.
More than 300 tenancy enquiries were received before settlement was even completed, according to Mr Wilkins, giving an indication of interest from the market.
One of the major suppliers of residential apartments over the next few years will be Mirvac Fini through its Peninsula development, which is a joint venture with Burswood Limited.
The Peninsula, essentially a new suburb, will be home to almost 3,000 residents on completion and feature a range of diverse housing, including seven apartment towers.
The first two towers, containing 190 apartments valued at a total $140 million, have sold out off the plan.
Mirvac Fini sales and marketing director Peter Gianoli said the third tower would go to the market in mid October.
“We are expecting the third tower, Aqua, to go very well, and are currently receiving a lot of registrations of interest,” he said.
Escalating construction costs were a risk, but a very manageable risk.
“We don’t want to increase our risk and exposure by building everything at once,” Mr Gianoli told WA Business News.
“It was always our intention to finish construction of the first tower before taking the third tower to the market, but demand has forced us to fast track.”
Mirvac Fini will release about 30 apartments as part of a four-storey low-rise complex in the Peninsula, for sale in the first weekend of December.
Interest is also strong at the luxury end of the apartment market, with two penthouses already sold off the plan for the $34m SILK development in South Perth, being developed by Broome identity David Morrell and mining entrepreneur Greg Jones.
Prices for apartments in the seven-unit complex begin at $3.4m and construction is expected to begin in September this year.
The most expensive completed South Perth apartment previously sold for $3.45m, and with SILK asking $4.6m for apartments on the first floor, this record could soon be broken.
Angus Murray, director of PRD nationwide project marketing, which is selling the project, said Perth’s luxury apartment market had performed very strongly with high levels of demand, particularly for quality product in prime, near city, waterside locations.
The SILK apartment site was purchased for $8.25m earlier this year, creating a residential sale price record for Perth.
