By Madison Kroon
Apartments being constructed in the inner city. Photo by Madison Kroon.
While it might appear that apartments in Perth’s CBD are increasing in numbers, some experts disagree.
The CEO of a local construction company doesn’t think there’s an oversupply of inner city apartments.
“I do not believe there is an increasing property surplus,” he said.
“Any oversupply that existed at the commencement of the State economic downturn has already been absorbed.”
The Real Estate Institute of WA (REIWA) said government population growth forecasts will see the state’s population continue to rise.
“This brings unit and apartment living in the inner region into the equation,” said Ronak Bhimjiani the Institute’s Research and Economics Manager.
“Looking at micro data… it is clear that some suburbs [especially, those around the coast and some areas near the CBD] may potentially be under supplied,” he said.
In many cases more than 60 percent of a development needs to be pre-sold before construction begins.
“ There are no projects in Western Australia that are developed on pure speculation,” said the construction company CEO.
“As a rule of thumb, the banks like to see a minimum of 100% of their debt covered by pre-sales, but
in most cases this is about 60% of a project’s end value that has to be pre-sold.”
He believes it’s more likely we will see a shortfall in apartments.
“There will in fact be an undersupply within the next three years with the market continuing to recover,” he said.
“There is a substantial lag for the delivery of apartments as it can take up to four years to deliver a project.
“By the time you acquire land, design, obtain approvals, launch to the market, pre-sell, construct, complete and deliver to the end buyer.”
Building Site Manager Timothy Hiller said the frequency of builds hasn’t increased in the last few years, and the location of these builds has moved out of the inner city.
“Size is determined by council restrictions and block size … the average build time is around 12 months for a nine story apartment block,” he said.
REIWA’s Ronak Bhimjiani said inner city living comes with many benefits, such as proximity to employment and lifestyle needs and a reduction in urban sprawl.
Click on the video to hear more from Building Site Manager Tom Hillier