Developers back Perth apartments, despite price slump

Source: AFR

Perth median apartments values slumped 6.3 per cent in May as the WA housing market continued to suffer from a weak economy, slowing population growth and an exodus of investors.

But developers such as BRW richlister Paul Blackburne and ASX-listed Mirvac, played down the slump, saying there was still solid demand for off-the-plan apartments in good locations.

For the quarter, Perth apartment values were down 7.8 per cent to a median of $420,000, according to CoreLogic RP Data, making it the worst performing property market in the eight capital cities.

Perth apartment values fell 6.3 per cent in May Erin Jonasson

Next worse was Darwin, a market also impacted by a decline in resources investment, where apartment values have fallen 6.6 per cent over the quarter. Nationally, apartment values were up 2.6 per cent over the quarter, led by a 5.3 per cent gain in the soaring Sydney market.

“There’s quite a lot of weakness in the WA unit market. Population growth is slowing, people are leaving and there is a huge amount of new apartment supply entering the market,” said CoreLogic RP Data analyst Cameron Kusher.

Figures on realestate.com.au show 46 new apartment projects being marketed in Perth compared with 76 in Brisbane, a market of roughly the same size, and more than 100 each in Melbourne and Sydney.

Mr Kusher said Perth remained a more traditional detached housing market with buyers yet to embrace apartment living as they have on the east coast where apartments make up 40-50 per cent of approvals. By comparison, Perth apartments make up 15 per cent of dwelling approvals.

“Discussions with Perth developers indicate that the investor segment is significantly quieter compared with other parts of the country. There’s not a lot of investor demand given that Perth rents are also falling,” he said. “We expect there to be further price falls.”

Mr Blackburne, the founder and owner of the Blackburne Property Group, said the CoreLogic figures did not apply to new stock.

“Good, new off-the-plan projects are selling well and prices haven’t dropped at all. In some projects with areas of very limited supply we are planning to increase prices at the end of the first quarter,” Mr Blackburne told The Australian Financial Review.

“The key fundamental that drives the Perth market is owner occupiers. Baby boomer downsizers and young professionals have very limited option for new, high-end affordable apartments. We are getting 300-400 new inquiries per month from mostly local occupiers.

“Savvy investors are around as they know rental returns are higher than Sydney and Melbourne and there is more growth potential.”

However, Mr Blackburne said sales rates had slowed. “We’re now selling out projects in nine months rather than in one month.”

Mirvac’s WA residential director Paige Walker said apartment sales at its Reserve residences in Claremont remained steady with current pricing outperforming the first release of apartments 12 months ago.

“Limited supply in the western suburbs has seen strong levels of inquiry and a healthy take-up of stock, which is a testament to the quality of Mirvac’s product and the location of the project,” she said.