ARTICLE BY: Claire Tyrrell

SOURCE: Business News

21/5/2024

Perth’s apartment market is bouncing back from historic low construction activity, but supply is still not expected to meet demand.

Urbis’ recent Apartment Essentials report showed that 248 apartments were sold in Perth in the first quarter of this year, compared with 218 in the prior corresponding period.

This compares with just 161 sales in the third quarter of 2023 and 171 in the second quarter of that year.

This represents a 40 per cent increase in the six months to March 31 2024 compared with the six months to September 30 2023.

The report showed that eight projects with 600 apartments started construction last year, compared with four projects with 569 apartments commencing builds in Q1 2024.

“Our data shows us that an appetite for new apartments is there, developers just need to be able to achieve prices that will make the development viable,” Urbis director property economics and market research David Cresp said.

“This is starting to get easier though with the increase in Perth house prices and stabilisation of construction costs.”

Currently only 441 apartments that were recently built are available for sale.

This compared with 1,518 apartments that were built and available for sale in Quarter 3 2021.

Mr Cresp said in reality, availability of completed stock was even lower.

“In some of these developments the developer has chosen to take the rental returns or are holding back stock due to the price increases that we are now seeing,” he said.

“We are still seeing a lot of demand for new apartments, however the prices currently required to make apartments viable (generally over $850k for a two-bedroom apartment) are leading developers towards luxury apartments in more premium areas.”

Just one apartment project has launched in the recent quarter, being WBG Property’s 48-dwelling development.

A further seven are expected to be launched over the next 12 months, with three of those expected to launch next quarter.

The report found that 2024 would see one of the highest levels of apartment completions since 2017, with 2,649 apartments currently expected to be completed this year, over 29 projects.

Mr Cresp said given that most apartment projects sell off the plan, this would not fix supply issues.

“Whilst a lot of projects are being complete, a lot are sold off the plan, which means completions aren’t necessarily equal to availability,” he said.

“About 70 per cent of the apartments that are currently under construction are being sold off the plan and for the ones that are under construction being completed this year, that will be even higher.”

This year’s boost in completions will be short lived however, with completions expected to drop again to 732 apartments in 2025.

“Given the record level of population growth that we are now seeing, Perth’s apartment market supply over the next two years is low,” Mr Cresp said.

“With construction costs starting to stabilise and greater confidence in Perth’s apartment market, we should hopefully start seeing new project launches increasing.”

Erben’s Cirque Duet is set to complete construction later this year, following the structure’s completion earlier this month.

A vast proportion of apartments in the Mount Pleasant development have sold off the plan, but some supply does remain.

The project is set to relaunch later this year, after a strong response at its initial launch in 2023.

Finbar Group launched its Belmont apartment project at the weekend, under the rebranded name Bel-Air, and sold 60 dwellings over just one weekend.

Finbar managing director Darren Pateman said the apartments, which started at about $458,000, filled a gap in the market.

“Perth is experiencing acute supply shortages of new, affordable product and buyers have been attracted by the quality of Bel-Air apartments, the location’s proximity to Perth CBD and airport and the potential for capital growth,” he said.

Urbis found that the average sales price for apartments in Q1 2024 was $1 million.

Discover Cirque Duet or continue to learn more about Erben apartments.