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Apartment sales off the boil

THE sales of Perth inner city apartment have dropped sharply as a result of the GST.

The situation is so bad developers and agents are finding it difficult to make a sale.

Some have resorted to cash back offers and offering prizes such as new cars in an attempt to lure buyers.

Some developments, such as Janet Homes a Court Gallery development in East Perth, have not had a sale for six months.

Developers have also absorbed GST costs because buyers are unwilling to pay the extra cost. According to Finbar project manager Rick Rimington, this means developers will not be willing to pay the same price for land they paid a year ago.

Material and labour costs should also drop once the the economy adjusted to the GST, he said.

“For us to maintain our margins we have to buy land cheaper. Either that or our margins get squeezed,” Mr Rimington said.

“The value of development land will come back a bit. Basically we are looking at paying up to 20 per cent less than a year ago.”

He believes that all developers will start redoing their sums to try to cut costs.

“If the end product doesn’t go up and your cost go up then something has to shift.

“Either the margin, the building costs or the value of the land. And I think the building costs are coming down slightly and I think the land is coming down.”

Mr Rimington said about 600 of the 800 inner-city units developed last year were sold.

He believes this could drop to about 450 sales this year.

“I think that the lower end (of the market) is still okay. The hardest end of the market is up above $300,000 to $400,000 – the investor market dwindles out above $300,000.”

Owner-occupiers at the top end of the market were keeping sales moving, he said.

Time Conti Sheffield principle Paul Conti said he did not believe the bottom had fallen out of the market, but its was becoming more difficult to sell.

“A year ago the market was running and the buyers were coming to us,” Mr Conti said.

“For every product we had one and a half buyers and we had to sell away half a buyer.

“Now we have half a buyer and our job is to make them into a buyer.

“The market was so hyped up before, with all the rush before the GST, it was running beyond itself and I think it has come down now.”

Mr Conti begun to read the signs of a slow down in April and started to steer away from Perth inner city sales.

“I just didn’t want to get bogged down with things that don’t sell,” he said.

Northbridge has been hardest hit because of security concerns and because of the nightlife in the area, he said.

Mr Conti said some agents were selling in-house to make it appear that sales of their development were going well.

“They might have a group of shareholders that want to buy a unit each themselves.

“So they come onto the market as six or eight sold or whatever it may be and it has been internal people buying them.

“So technically they are correct, but an astute investor should ask who they have been sold to, has it been in-house and question where the sales coming from.”

There are offers of a $10,000 cash-back or the chance to win luxury cars to try to tempt buyers.

“The reason for that cash back is because they don’t want to discount the price – they get a $10,000 cash back but it still appears at $198,000,” Mr Conti said.

“They don’t have to devalue the apartments of the other people who bought in prior to that cash back.

“ If they were to lower the price to $188,000 then the value of everyone’s apartment drop $10,000 and there would be problems.

“In effect it is just away to camouflage the price reduction.”

He believes the right approach would be to price the apartments correctly in the first place.

Colliers Jardine research manager David Cresp said while sales had slowed down, the movement toward inner-city living was still alive and likely to continue for some time.

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