Perth’s high-end apartment market matures as downsizers eye luxury

Source: The Market Herald

A new generation of apartment developments has elevated the level of apartment living in Perth, with a greater focus on high-end developments in prime locations.

According to Urbis, the Perth new apartment market saw its busiest quarter since 2016, with 475 sales in the second quarter of 2021, this follows a period of high activity in the previous six months.

It was also the first quarter in which more units were sold off the plan or in buildings under construction (52 per cent of sales) than completed units, a reversal of recent patterns.

The high end flourishes

Many owner-occupiers are seeking more upscale units, with 53 per cent of transactions occurring in buildings classified by Urbis as high end or luxury/premium complexes. These sorts of units often account for less than 40 per cent of total sales.

Perth’s premium districts were the top-selling areas for the quarter, with 179 apartments sales across 27 developments in South Perth, Applecross, Mount Pleasant and Como with a weighted average sale price of $1.3 million.

The western suburbs also witnessed high sales, 76 sales over 26 projects in North Fremantle, Claremont, Nedlands, Mosman Park and Floreat, with an average transaction price of $913,000.

The buyer concentration on premium apartments in more wealthy neighbourhoods resulted in the highest average selling price ever recorded in Urbis surveys, at $900,214, a significant increase over the previous quarter’s level of $633,206.

Earlier this year, property developer Paul Blackburne sold the city’s most expensive penthouse for $19.3 million at his One Subiaco building, with plans to smash the record again with the $22.7 million penthouse at its Claremont development, The Grove.

“The Perth high end luxury apartment market has been very strong for at least the past five years,” he said.

“There are very few options for high end luxury apartments in prime locations which is why our projects sell out usually before completion and over 80% before construction start.”

Mr Blackburne said his company, Blackburne, has been able to find prime sites in prime location in the western suburbs.

“The market is maturing a lot and people want much larger and much higher quality apartments which is what we do,” he said,

A limited supply and increasing demand is likely to put upward pressure on prices next year, according to Mr Blackburne.

“We are almost sold out of the current 3 projects and we have 2 more to release next year,” he said.

“Building prices have gone up and land is costing more so we will be raising prices 5-10% per year over the coming years to ensure projects are still viable.

Urbis Director David Cresp said buyers are being attracted to new apartment developments in prime locations with high-end specifications as the reputation of apartments increases.

“We’ve sort of still got this attitude a little bit that apartments are the poor cousin,” he said.

“Now people are realizing, ‘no, these new offerings are better than houses that are in the area’.”

Downsizers bouyed by booming market

Much of this demand for luxury apartments is coming from the downsizer – or rightsizer – market, a movement helped by a booming residental market, according to Mr Cresp.

“They needed confidence in the ability to sell their own home at the value they thought was in their own home before they would go out and look at what other options there were,” he said.

Mr Cresp said the rise in home prices had provided this confidence for rightsizers sell up and move into apartments.

A recent report from Knight Frank said that across Australia rightsizers are dominating activity in the top five per cent of residential market.

Prices for new prime apartments and established prime apartments in high-rise projects have risen significantly in the last six years, rising 36 per cent and 31 per cent, respectively, across the major cities since June 2015.

The report stated that this is owing largely to an increase in demand from the rightsizing buyer, where the pipeline of new apartments being developed is not meeting this demand.

Over the past five years Perth has seen an increase in downsizers buying high end luxury apartments, according to Mr Blackburne.

“Prior to this, there was not a lot to choose from when looking for a quality residence that was also a good size with great amenities,” he said.

“People are wanting to buy now whilst prices are low before the high-end apartments become out of reach for most.”