02/02/2015 - 16:30

Building boom hits rentals: REIWA

02/02/2015 - 16:30

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Perth's housing construction boom is fuelling a blowout in the number of properties available for lease, with the proliferation of apartments in particular prompting the state’s top real estate group to question whether developers and government policy were providing what residents want.

BULK: Apartment blocks are popping up in suburbs around Perth. Photo: Attila Csaszar

Perth's housing construction boom is fuelling a blowout in the number of properties available for lease, with the proliferation of apartments in particular prompting the state’s top real estate group to question whether developers and government policy were providing what residents want.

Home building in Perth has been humming along at a record pace for the past 12 months, with Australian Bureau of Statistics data showing an all-time high of 24,100 homes under construction in the September quarter.

Included in that was 8,350 apartments, representing 35 per cent of homes under construction and a direct result of the state government’s efforts to increase the density of Perth.

Real Estate Institute of WA president David Airey said planning rules introduced in recent years – including the introduction of development assessment panels and the state government’s mandate of 47 per cent of new housing to be rolled out in existing areas – had led developers to maximise the output of development plots by building as many apartments as sites would allow.

“All that housing has got to go somewhere – it’s either got to be rented or it’s got to be occupied by owner occupiers,” Mr Airey said.

“We simply haven’t had the population growth or the growth of the economy to fill this massive increase in housing supply that’s arisen in the last two years and is due to continue in at least the next two or three years.”

But Mr Airey said he was not sure whether high-density living was actually what Perth home buyers wanted.

“We love the block of land, that’s evidenced by the dwelling mix in Perth; it’s 79 per cent single residential dwellings and the balance is in higher and medium density,” he said.

“People are being virtually forced to change a lifetime habit to look at higher density living.”

Mr Airey said the infill efforts, as well as the state government initiative to funnel first home buyers away from the established market through increased grants to construct new houses, were also having a significant negative impact on the rentals market.

However, many apartment developers would disagree and have told Business News in the past that Perth's market is changing in line with other bigger cities.

REIWA data shows there are already nearly 6,500 homes available for lease in Perth, up 200 per cent since the low experienced in September 2012, after 88,000 people moved to WA in the preceding 12 months.

In the year to June 2014, population growth had slowed to 54,500, the lowest growth rate in eight years.

Mr Airey said he expected rental listings to rise past 7,000 in the short term and even further towards the end of the year.

“It goes up every week, despite the fact that we’re leasing 1,200 to 1,500 properties,” he said.

“Every week they are just being replaced with more properties.”

The result of the blowout in listings has been a reduction in weekly rents, which have come off a peak of $480 per week last year to around $440/week in the December quarter.

However, high-end and executive rentals in and around inner-city suburbs have fallen in some cases in the order of around 20 per cent.

But Mr Airey said it wasn’t time for real estate investors to hit the panic button just yet, despite the unfavourable numbers.

 “Looking back over the last five years we’ve had the boom through 2010-2012 where rents virtually doubled and they haven’t come off anywhere near to the extent of the rate by which they increased, so I think it’s a case of weathering the cycle and making sure that your asking rentals are realistic,” he said.

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