Strong residential market sees strongest apartment sales since 2016 and strong off plan sales activity.
The Perth new apartment market recorded the strongest quarter of activity since 2016 with 475 sales in Quarter 2, 2021 based on surveying by leading property consultant Urbis. This follows on from strong activity over the previous six months. This is well up on the 414 sales seen last quarter and up on the strong result seen in Q4 2020 of 457 sales.
The market continues to be driven by owner occupiers who this quarter had the highest share of market activity in any quarter at 76% of sales.
In a reversal of trends seen over the last few years, this was the first quarter where more apartments were sold off the plan or in buildings under construction (52% of sales) than in completed apartments. This is highlighting the confidence in the market going forward and in Perth developers to be able to deliver on their commitments for quality when people are buying off the plan. It also reflects the fact that we have been seeing a fall in the amount of completed and unsold apartments over the last year. Whilst there were 1,838 apartments completed and un-sold at the start of 2020, this has now fallen to 1,210 apartments at the end of June 2021.
Sales in off the plan projects were driven by successful launches of new projects. The top three selling projects for the quarter were all projects that had launches this quarter and were:
Lumiere, Edge Visionary Living, South Perth
Freeman, Australian Development Capital
Riviere, Edge Visionary Living, Applecross
Many of the owner occupiers are also looking for more up market apartments with 53% of the sales being in projects that Urbis classify as high end or luxury / premium developments. These types of apartments generally only account for less than 40% of sales.
The top selling precincts for the quarter were Perth’s premium suburbs with the Fringe – South precinct recording it’s best ever quarter and selling 179 apartments (sales across 27 projects in South Perth, Applecross, Mount Pleasant and Como with a weighted average sale price of $1.3 million). The other area that saw strong sales was the Western Suburbs (76 sales across 26 projects in North Fremantle, Claremont, Nedlands, Mosman Park and Floreat with an average sale price of $913,000).
The buyer focus on premium apartments in more affluent areas mean that the average sale price recorded was the highest ever recorded in Essentials surveys (running since Q3 2014) at $900,214. This is up considerably from the level seen last quarter of $633,206 and really reflects the strong sales in premium apartments.
Whilst the level of investor activity has continued to be low with local investors only accounting for 14% of sales, there was an increase in activity from interstate investors who accounted for 5% of sales for the quarter which was one of the better results that has been recorded. Offshore buyers continue to account for a very low proportion of sales at only 5% of sales this quarter and for this year. The proportion of off shore buyers is down slightly from 6% of sales in 2020.
Increased buyer demand was meaning that more projects were preparing to launch over the next 12 months and Urbis are tracking a further 19 projects and 1,486 apartments that were planned to be launched at some stage over the next 12 months. At current demand levels this accounts for three quarters of demand and shows that supply is keeping up with current increased demand levels. However, new approval levels continue to be low and only 274 new apartments were approved for the quarter, well below demand levels.
Urbis Director, David Cresp said “The demand for apartments continues to be strong and this is reflecting the growing confidence in the Perth property market. Owner occupiers are now confident in being able to release equity when they sell their house and making a choice to right size either now or at some stage in the future when buying off the plan.
Whist apartment prices were starting to increase at this stage construction prices were increasing at a faster rate. This is putting a lot of pressure on apartment developers and whilst they were currently trying to hold prices at current levels, increased construction costs were going to force prices of new apartments up over the next 12 months.
It is a really hard time for developers at the moment, they were racing to get the required levels of pre-sales before construction costs go up more than they have budgeted for. The rising costs of labor and materials are making it a very challenging market for developers and price increase will have to flow through to the apartments over the next 12 months.”
Apartment completion in 2021 were forecast to be at 1,162 apartments which is the lowest level that has been recorded through this cycle and well below the peak levels seen in 2017 at 2,887. It is also below the level of sales that were seen in 2020 at 1,218 apartments and well below the level that will be seen in 2021.
Mr Cresp said, “The fact that almost $430 million dollars of apartments were sold in the quarter really highlights that the Perth apartment market is maturing and that there is significant levels of demand for well located, well designed and high quality apartments in Perth.”
Urbis Perth Apartment Essentials Q1 2021 Snapshot
The Perth Apartment Essentials Report found:
475 sales were recorded from a sample of 86 surveys in Quarter 2, 2021. This is the highest level of sales recorded since the first quarter of 2016.
The Fringe – South precinct recorded its highest level of sales over for a quarter with 179 sales, followed by the Western Suburbs (76 sales) and Inner City (62 sales).
Highest recorded quarterly average sales price at $900,214. In total there was
Two-bedroom two-bathroom product made up the majority of sales at 47% of total sales.
Owner occupier sales dominated the market with 76% of transactions.