MORE than four years after the onset of the GFC, it seems property investors in Perth are still adjusting to the persistently weaker conditions in the Western Australian market.
Mirvac Group last week announced $55 million of write-downs in the value of its Perth apartment projects, at Leighton and Burswood.
Last week’s announcement marked the third round of write-downs Mirvac has made on its WA properties in the past two years.
It is not alone in doing so, with other listed property companies such as Port Bouvard and Diploma Group also shining a public light on write-downs that have extended across the sector, from Mandurah in the south to Scarborough in the north.
Mirvac’s largest write-down last week was at its proposed Beachside Leighton - Stage 2 development, which was cut in value by $43 million.
The development envisaged 89 apartments and was valued in Mirvac’s most recent property compendium at $267 million.
“Despite the low to mid-price point market showing early signs of recovery, the high-end market in Perth remains weak, with oversupply a concern for potential buyers,” the company said.
The proposed second-stage apartments sit alongside the completed first-stage development, which comprises 68 residences and is valued at $174.5 million after a $25 million write-down one year ago.
That write-down was triggered by the failure of some investors to complete pre-sales contracts and the “protracted delay in the recovery of values at the upper end of the Perth market”.
Diploma Group faced similar problems when it encountered a large number of defaults by investors who had made off-the-plan purchases at its Zenith and Rise apartment projects prior to the GFC.
The subsequent sale of these apartments at “materially lower” valuations resulted in $11 million of losses last financial year.
Property valuer Gavin Hegney said recent sales evidence indicated high-end apartment values had stabilised, albeit after a big fall.
A Beachside Leighton penthouse, for instance, had sold recently for just above $4 million, after selling in 2007 for about $9 million.
“I think a lot of the top-end apartments are selling at or below replacement cost,” he said.
Mirvac’s most recent write-downs included a $12.3 million cut in the value of its Peninsula apartment project at Burswood, which has five completed towers.
A company spokesperson said this was primarily because of Crown’s planned hotel development, which will be about 20-storeys, and will reduce the river views from some of the Mirvac apartments.
Following that logic, it will be interesting to see if the owners of the Central Park office tower (Perron Investments and Frasers Commercial Trust) review the value of their property after the Brookfield Place tower took away much of the river views.
The Crown hotel project has also triggered the prospect of legal action by residents in the Mirvac towers, who are worried about the impact on their views and property values.
Lawyer Doug Solomon is investigating legal action based on the government’s use of the Casino Agreements Act to bypass normal planning rules for the hotel development, which will be on land bought from the state for a concessional price of $60 million.
Putting together all of Mirvac’s WA writedowns over the past three years, including its Mandurah and Dianella projects, the group has written off a total of $118 million.
It also has a portfolio of successful projects under way, being the seventh largest land developer in the state, according to the WA Business News Book of Lists.