A RECENT industry analysis of the apartment development market in Western Australia has found finance and construction constraints will reduce the current supply of apartments by 85 per cent by 2013.
A RECENT industry analysis of the apartment development market in Western Australia has found finance and construction constraints will reduce the current supply of apartments by 85 per cent by 2013.
A joint survey by property analysts Colliers International and the Property Council of Australia found there are 24 apartment projects currently under construction that will deliver 1,627 dwellings.
More than 1,400 of these will be completed this year, and 61 per cent of those projects are located in the CBD.
Major developments to be completed this year are Diploma’s Zenith City Centro, Cape Bouvard’s CeVue and Oceanique, Finbar’s The Edge, Mirvac’s Aquarius and Brookfield Multiplex’s The Leighton.
In terms of future supply, there are 61 projects with the potential to deliver 6,584 apartments post-2012 that are approved for development or proposed by developers, but not yet under construction.
Property Council WA executive director Joe Lenzo said the apartments delivered to market last year, this year and next year were all the remnants of the apartment boom.
“It’s the same thing with the office market, those 2012, 2013, 2014 years, you can tie back to when the banks stopped funding in 2008, and say a direct result of the new credit conditions is that literally the pipelines for every sector are drying up,” Mr Lenzo told WA Business News.
“Despite population growth, despite strong employment growth and strong demand, the supply is just not there.”
Mr Lenzo said that cutting development red tape, securing project finance and containing building costs was critical to secure the long-term supply of apartments in WA.
“State government initiatives such as independent development assessment panels, the creation of suburban activity centres and more flexible multi-unit development design codes will help to stimulate development of high density projects,
“With most projects taking up to 30 months to reach the market, the time to re-stock the pipeline is now.
“The survey also found that owner-occupiers have become the dominant purchasers and local businesses have become the main developers of apartments in WA, displacing national institutional developers.”
Colliers International research consultancy manager Erwin Edlinger said developers were responding to market forces by delivering a higher volume of lower-end, smaller sized, more affordable apartments.
“This is a change in market dynamics whereas we experienced primarily higher end, larger apartments produced during the boom,” Mr Edlinger said.
“More than 50 per cent of all apartments being produced currently are two-bedroom, which is an attempt to cater for the growing demographics of the empty nesters and young professional couples who desire to be located close to the CBD.
“With the GFC and economic uncertainty, buyers are price sensitive and developers are responding with affordable product.”
But Property Council policy director Lino Iacomella said there would be additional price pressure for apartment purchasers, because if WA was not at the point of equilibrium it was falling into undersupply.
“Over the next six months that’s critical because that’s the trigger point for price pressures in the market,” Mr Iacomella said.
“At the moment it’s been pretty well acknowledged that it’s a buyers market, but that could flip back over to a sellers’ market. That’s really a message to buyers and investors that you’ve got a year, you’ve got six months to get your act together.”
