17/08/2011 - 10:16

Slow going at Scarborough

17/08/2011 - 10:16

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Slow going at Scarborough

DEVELOPERS along the Scarborough beachfront received a bit of good news last week when the City of Stirling gave the green light to a $53 million revamp of the precinct.

However, the council decision, which must still be approved by the Western Australian Planning Commission, is only expected to be a small element among the forces affecting demand for numerous apartment developments in the area.

While the clock tower and surf club remain in place, a number of major improvements will take place in the area, including improved road infrastructure at the intersection of Scarborough Beach Road and West Coast Highway.

But the cosmetic changes are unlikely to have much immediate effect on the local apartment market, which has been hit more by buyers’ global concerns.

Despite plenty of interest, most developers said they had found the market tough going in recent months, with the waters tested by at least three new apartment projects – The White Sands, Oceanna29 and Bluewater Scarborough.

While each of the three major new developments is pitched at a different market segment, most are contending with an absence of investors and difficulties for risk-averse owner-occupiers in selling their current homes as falling property values stall the market.

The biggest of the major developments, The White Sands, has suspended its active marketing about three months after launch, citing difficult market conditions for its 140-unit development, 70 of which are short-stay apartments, with towers between eight and 12 storeys.

The consortium behind that project – a joint venture between Singapore’s Chip Eng Seng Corporation and Victoria’s Cranecorp – is understood to be reconsidering its strategy, including the possibility of a staged release, after a disappointing period of pre-sales.

Neighbouring Oceanna29, an eight-story, 49-unit development, has also experienced tough selling conditions two months since its soft launch. The backers are also looking at their options, though that appears to be around reconsidering the project’s funding level if pre-sales fail to reach the level required for bank finance.

The third and smallest of the significant new developments in the area, the 36-unit Bluewater Scarborough, is claiming more success with 45 per cent pre-sales, although even its proponent admits the past two weeks have been very tough.

Bluewater developer Gary Dempsey said his project had performed better than most due to the proximity to the coast – it is on the beach side of West Coast Highway, whereas the other two are on the east side of the highway – and is very competitively priced despite being at the luxury end of the market.

Mr Dempsey said the level of pre-sales required to win bank finance approval seemed to shift from week to week as global markets ebbed and flowed, but he remained confident his project would have reached a level of buyer commitment by October to move into the construction phase.

These developments are also competing with Cape Bouvard’s Cevue development at the southern end of the precinct. Cevue is built, with 50 of the 78 residential apartments occupied, although it has pricing sensitivities to manage as it seeks to sell units in the current market without undermining the value of those bought off the plan before the GFC.

The tight market has not stopped the potential for further development.

The City of Stirling is understood to have received a new development application from the owners of the Rendezvous Observation City Hotel on the Scarborough beachfront.

The hotel’s move to change its usage and become an apartment block was stopped by authorities last year. It is understood the hotel’s owners have gone back to the drawing board with plans for up to two separate apartment towers, one on each side of the existing building.

Such a development is expected to be within existing town planning guidelines and would give the market another project on the beachside of the precinct.

It is also notable that the group, which includes investors from South-East Asia, behind the Oceanna29 project has recently acquired a 2,000 square metre site on the corner of Scarborough Beach Road and Filburn Street previously understood to have been owned by a company associated with the Seashells tourism business, which operates short-stay apartments in the area.

Martin Ong from Oceanna Management said the Filburn Street site already had development approval for an eight story mixed use building, which his consortium would consider developing.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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