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Slowdown hits apartment-style developments

A FLAT rental sector and market uncertainty has put the brakes on the residential construction boom in the city.

However, a market remains for the right type of product for investors and developers, it just requires careful research.

Perth won’t see the big number of apartment-style residential developments that have been launched in the past year, according to one industry analyst.

“We’ve seen a lot of developments launched this year; I think we’ll see less of the apartment developments next year,” he said.

“We’re also seeing a bit of a change of focus from the inner city to near-city locations such as Burswood.

“No [recent] developments have done amazingly well … it’s not like five years ago when Fini sold out an apartment development before work had even started.”

Asset Special Projects property acquisitions and developments senior manager Gianpaolo Crugnale said he thought the market would slacken off in the next 12 months.

“My belief is that for about a year it will slow to a trickle, but there’s a lot going through the planning stage now so in about a year and a half it will start coming out,” Mr Crugnale said.

“Developers are finding themselves re-visiting their developments plans and will be required to re-think strategies.

“Developments will need to focus on Perth’s demographic trends rather than relying on experiences in the east.”

The message for both property investors and developers in this market is that research is essential.

Real Estate Institute of Western Australia public affairs director Lino Iacomella said the rental vacancies in WA were occurring across the entire range of property products, including units and houses.

“This is unusual,” he said.

“When vacancies rise they tend to be among units that have the most investors.

“This time around we’re noticing houses as well.”

Despite this the long-term average vacancy rate is 3 per cent, according to REIWA figures.

“While the figure in Perth is above that it’s certainly not at a critical point,” Mr Iacomella said. “And there’s still evidence of rents rising.”

He said the rise in vacancy rates also was symptomatic of a more general shift in social values.

“We’ve noticed an increasing number of people in their late 20s and early 30s who are opting to buy a home for the first time,” Mr Iacomella said.

“The reason for the change has a lot to do with investment decisions and lifestyle decisions.

“This is significant because for the first time in 30 years there’s a lift in home ownership.

“And the first homebuyer’s grant has been particularly effective in Perth because it has more value in Perth.

“$7,000 in Perth has much more impact and value than in Sydney.”

Investors interested in moving money into the property market needed to carefully research any purchase, he said.

Peter Fletcher Realty managing director Peter Fletcher said the vacancy factor was quite high.

“It’s a factor that investors need to be across and certain sectors are being punished particularly hard,” he said.

“Older style houses that are not differentiated from their competitors and that need a lot of maintenance are particularly hard to rent out.

“At the other end of the scale, one bedroom units and bedsits seem to be going very well.”

Issues such as proximity to education facilities and transport links played a big part.

“As soon as you get close to a university you’ve straight away got a ready market and a market that doesn’t have a lot of discretion,” Mr Fletcher said.

Properties renting in from $150 to $200 a week were the best product in terms of securing a tenant, he said.

“That tends to push people back into the unit market and also possibly into the ‘Cinderella’ suburbs, such as Rivervale and Belmont.”

The Investors Club in WA national branch manager Barry Atkins said that, while WA had one of the highest rates of people renting in Australia, investors had to be selective.

Investors needed to take the time to research the demand for rental properties in suburbs, he said.

“When it comes to looking at a property people don’t always look at it and work it out.”

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