• Apartment markets slow but steady

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    Apartment markets slow but steady - reiwa.comThe State Government’s Housing Industry Forecasting Group predicts that 15.4 per cent of WA housing stock will come from apartments by the end of 2016.

    At the same time, ABS figures show 17 per cent of new dwellings in Perth are apartments, compared to 55 per cent in Sydney and 40 per cent in Melbourne.

    Major WA apartment developers continue to build new apartment projects despite slowing sales but market uncertainty is delaying many smaller developments and this is easing fears of an apartment oversupply.

    Apartment vacancies

    A study published in July by the Master Builders Association and Y Research estimated there were more than 35,000 apartments in buildings of three storeys or higher in 64 suburbs within 15 kilometres of the Perth CBD, with just 1,425 (four per cent) vacant.

    This compares to REIWA’s estimate of 5.4 per cent across all dwellings in the three months to August.

    In the study, the apartment vacancy rate within five kilometres of the CBD was 3.4 per cent and in Perth’s inner city it was 4.5 per cent.

    According to the MBA, older apartment buildings were well occupied while buildings completed in the previous 12 months had a much higher vacancy rate of more than 10 per cent.

    New apartments, particularly one bedroom, were taking between three and six months to be occupied upon completion.

    Supply versus sales

    According to a study released by property consultancy Y Research in May, apartment developments were under construction or planned in 65 Perth suburbs.

    In June 2015, there were about 10,000 Perth apartments in the application or planning approval stages.

    Research by the Urbis economic consultancy suggests 57 new apartments are being completed in the Perth metropolitan area each week, with 2,950 expected to be built by the end of 2015 - well up on the 2009 record of 2,000 new apartments.

    In the March quarter there were more than 50 apartment sales each week so the market is considered fairly balanced.

    The Urbis Perth Apartment Essentials report found 668 sales were recorded across 114 surveyed metropolitan projects during the June quarter, up 41 per cent on the December quarter 2014, with 49 per cent of the sales to local owner-occupiers and 30 per cent to WA investors. Among the 668 sales, 109 were in the Perth inner city.

    Fewer projects

    Ongoing strong supply is increasing apartment vacancy rates and competition for tenants is putting downward pressure on rent levels.

    However, most bank financing for apartment projects requires about 75 per cent pre-sales and many projects are being delayed until that requirement is satisfied, which in turn is causing concerns and investment uncertainties for buyers.

    The slow market is causing most problems for smaller apartment projects in outer suburbs or not in prime locations, with significant discounting by developers to lure buyers.

    Fewer apartment projects are being launched and this is easing fears that Perth might suffer a glut of apartments, with industry leaders predicting a sellers’ market will begin to emerge in 2016 that pushes prices up.

    WA building approvals fell more than 13 per cent in June to their lowest level since late 2013 and a majority of this was a sharp fall in approvals for apartments and units.

    R-Code threat

    The State Government has gazette changes to the R-Codes system that reintroduce a site area per dwelling calculation and reduce the number of apartments permissible on R30 and R35 blocks.

    The changes introduced in October also increase parking and open space requirements for multiple dwellings.

    Councils are also expected to be given more leverage in their local planning schemes to restrict apartment developments on land zoned R40 as long it is not within 800 metres of a railway station or key activity centre.

    The changes apply the same rules that govern unit and townhouse construction and the government says they are in line with community feedback to ensure apartment developments are appropriate for the surrounding neighbourhood.

    Opposition

    The Property Council of Australia (PCA) has voiced opposition to the code changes, claiming they are unnecessary and a knee-jerk response to councils opposed to urban infill.

    The PCA says they should be accompanied by significant rezoning around activity centres and transit stations if infill targets are to be met to prevent urban sprawl.

    Master Builders WA believes the R-Code changes will restrict the housing choice available to the public.

    There have been industry calls for the Government to force zoning changes by local councils or to take over planning to ensure density development in appropriate areas surrounding train stations and supermarkets so it can achieve its 47 per cent infill target by 2030.