Apartment push into east-end

A SHIFT is taking place in the city’s east-end property scene with residential developments rapidly overtaking the traditional office market.

Some analysts are suggesting the growth of apartment developments indicates a warming in people’s attitudes to high-density living, in a city where the suburban sprawl has never put the squeeze on space. As new developments in the east-end of town reach completion, market analysts are talking down suggestions that the Perth apartment market is oversupplied.

As the market continues to expand the smart investors are looking at recently completed or second-hand apartments, according to Colliers International manager residential Nicholas Wells.

“The secondary market or the re-sale market is providing the best opportunities,” he said.

“I cannot understand why people aren’t snapping up (re-sale) apartments.

Mr Wells said buyers were attracted to new product for emotional reasons rather than sound economics.

The profile of the biggest buying group also played a significant role, he said.

An analysis of the market reveals a number of different buyer groups, however the single biggest market is the baby boomers age group, who are looking to move out of the traditional family home into a smaller, more secure property.

“The market is evolving because people are ageing and looking for their next home,” Mr Wells said.

Rather than suggesting the market was currently oversupplied, Mr Wells said the developments that failed to live up to expectations had lacked thorough research ahead of design and construction.

“I’d argue that there are some products that have missed the market,” he said.

“If they’ve got it wrong then they might be claiming that there’s oversupply (in the market). It’s just an excuse because they missed out.”

The market hasn’t performed to a high degree in the past 18 months, predominantly in response to the first home owner’s grant, which shifted a number of people out of the rental market and into home ownership.

“There was a market abnormality that was created and lasted for a short period after the implementation of the first home owner’s grant,” Mr Wells said.

“That sucked out a lot of renters.

“It was a short-term anomaly and it has stabilised again.”

The owner occupier level in the apartment market has increased in the past 18 months, according to research undertaken by Pro Property.

“It’s now at about 40 per cent,” Pro Property principal John Lagdon said.

“I think Perth has grown up as a city and people don’t want to sit on the freeway any more or water lawns,” he said.

“We’re also finding in the re-sale market there are a lot more owner occupiers.”

Swanline Developments is the property developer responsible for the apartment development at 70 Mount Street and the Bellevue Mansions on Bellevue Terrace.

The company’s managing director, James Harris, said the luxury apartment market was still fairly tight in WA, with statistics compiled by Swanline Developments suggesting only 16 apartments sold for more than $1 million in Perth in the past 12 months.

“My feeling is that the lower end of the market continues to kick,” Mr Harris said.

“At the $300,000 mark and below apartments are still being picked up by young professional couples or professional singles.

“In the price range of $350,000 to $700,000 there is some movement in from the western suburbs and a lot of these people are empty nesters.

“I also believe security is an issue.”

At the top end of the market there’s a strong trend towards syndication, he said.

“Up to five or six people are brought together by facilitators or financial planners and enter into an agreement to construct an apartment and move in,” Mr Harris said.

Industry analysts agree that green fields sites for new apartment developments are increasingly difficult to find, however there remains a large number of potential redevelopment sites around the city.

“It’s certainly fair to say that there’s not an endless supply of land, but then someone like Sarich gets the CSR sugar facility in Mosman Park,” Mr Harris said.

“People are overlooking the constant re-cycling of property. Mount Street is a good example of where developers have tapped in to some of the older historical buildings.

The apartment market isn’t confined to Perth and the near city suburbs, developments are taking shape as far south as Mandurah and in Joondalup to the north.”

The inner city, especially Northbridge, is near the top of the list for the best buys.

Recently finished apartment products in Northbridge are undervalued, according to one industry source.

“I think Northbridge is undervalued,” he said. “The government has spent a lot on the infrastructure.

“The same property that would cost up to $280,000 in Perth you can buy it in Northbridge for about $220,000.”

As property availability and the acceptance of high-density living increases, so too will the retail development required to service such a growing population in the east end of the city.

While Perth will never be dominated by high-density living, industry analysts suggest the development of the apartment market in other Australian cities, particularly Melbourne, will be reflected in the growing support of apartment living in Perth.

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