Prominent land developer Nigel Satterley has predicted more pain to emerge from Perth’s apartments market, forecasting widespread price falls and more projects to fail as pressure builds on developers.
Prominent land developer Nigel Satterley has predicted more pain to emerge from Perth’s apartments market, forecasting widespread price falls and more projects to fail as pressure builds on developers.
Mr Satterley, who heads Perth’s largest land developer, Satterley Property Group, first warned the Western Australian apartment market was in danger of overheating in 2014.
Since that time, developers have continued to pursue increasingly larger projects across the city, but have been achieving mixed sales results.
Apartment buyers have been much slower to move during the past 12 months, with the plethora of choice available resulting in potential buyers taking more time to make decisions.
Perth’s most prolific apartments developer, Finbar Group, has predicted subdued sales conditions to continue for the remainder of the financial year, while another prominent developer, Blackburne, has recently reported slow, yet solid sales across its projects.
Other developers are not faring as well, however. Business News reported last month that the challenging conditions had resulted in the developer behind the Spectrum apartments in West Perth going into administration.
It has since emerged that two other projects have recently been pulled from the market – the $160 million Park on Swan proposal in Rivervale, which was being marketed by Limnios Group on behalf of a Singaporean developer, and Westbridge Property Group’s Tenth and Beaufort, which has been shelved because of slow sales.
Mr Satterley told Business News he expected more approved projects would not come to fruition, particularly in the inner city, South Perth and Rivervale areas.
“Perth is on the nose with the banks,” Mr Satterley said.
“Anything you do in Perth, residential, offices, the banks are all very conservative.
“Perth is the last place they want to lend; Australian banks know that Perth is facing a period of massive oversupply.”
Mr Satterley said research by his firm on product over four storeys showed there were between seven and eight years’ worth of apartments supply already in the market.
Property analytics firm Urbis reported in October last year that there were 4,965 apartments under construction or in pre-sales, while more than 6,700 apartments were at development application stage.
But developers maintain that projects under construction require significant amounts of pre-sales to begin, and those apartments are being sold mainly to owner-occupiers, which would seemingly dispel any issues of oversupply.
Nevertheless, Mr Satterley said he expected prices for near-city one-bedroom apartments to fall to $325,000 within six months, while he said two-bedroom product would be selling for $425,000.
Average prices in the inner-city were just over $660,000 in October last year, while fringe suburb average prices ranged from $506,000 to $1.1 million, according to Urbis.
However, Blackburne managing director Paul Blackburne said the apartments market had simply returned to more normal conditions after a sustained period of growth, and as such, did not expect any price reductions of that magnitude.
"The reality is, apartment prices on average for good projects have not gone down, and most educated, independent experts agree that there is a very strong future for the apartment market and capital growth in Perth," Mr Blackburne told Business News.
"It’s unfortunate that some people in the industry who have vested interests in land development feel the need to try and talk down the apartment market.
"Having a land developer say that apartments are oversupplied and will drop in price is like an apartment developer saying that land prices will drop and land is oversupplied, which is a fundamentaly untrue statement, led by self interest."