Apartment investing the way forward

Ronald ChanSponsored
Finbar Chief Operations Officer Ronald Chan.
Camera IconFinbar Chief Operations Officer Ronald Chan. Credit: The West Australian.

With Western Australia continuing to be the most affordable state to live in, interest in Perth apartments is growing and new policy recommendations from the Property Council of Australia (PCA) has highlighted ways to fight the issues currently impacting the apartment development pipeline.

Last year, the property market for apartments in Perth was in a good spot for local buyers, as record-low vacancy rates and low interest rates made it cheaper to buy than rent in some areas.

Unfortunately, the impact of COVID-19 on supply chains and the skilled worker shortage has now put more than 10,000 new apartments on hold, as well as $2.2 billion of pre-approval apartment projects.

The potential undersupply and likely impact on pricing have been discussed in this column previously, but it is worthwhile to have a closer look at some of the research conducted by the PCA that highlights the scale of the problem.

It is to the great credit of the PCA, and the broader property sector it represents, that it is committed to helping address ways the current and future undersupply of accommodation can be rectified.

The PCA conducted in-depth interviews with 21 leading apartment developers in November last year, and the comments and information from the participating companies were sobering.

In summary, about 35 per cent of projects with approved development applications (DA) will be delayed, with the majority of respondents reporting projects are being delayed by seven to 12 months. Half of all respondents said they had future projects without DAs that were now on hold, with a total value of $2.2 billion.

With supply set to become tighter as WA looks to open its borders in February, demand is expected to continue upward as interstate Australians and international migrants look to relocate to WA.

However, this increased demand may be part of the solution.

PCA WA Executive Director Sandra Brewer said policy response was the best long-term solution to restarting the Perth apartment pipeline, and I agree.

Ms Brewer emphasised swift action was required to avert a future housing and affordability crisis and, unlike our fellow states, WA was in the perfect position economically to introduce and enforce these policies.

Part of the recommended policy responses have focused on prioritising population growth in WA, targeting skilled worker migration and removing investment barriers for them.

With 52,000 job vacancies in WA, despite the unemployment rate hitting its lowest point since 2012 and forecasts predicting local population growth will not meet current workforce vacancies until 2024, there is an urgency to encourage migration to fill these roles as soon as possible.

As the State Government’s $185 million Reconnect WA package works to let WA safely re-engage with the world once our borders open, this is the perfect chance to use Perth’s stable economy and housing affordability as a major boon for attracting skilled workers.

Another recommendation proposed by the PCA was to make permanent and expand the stamp duty concession. If done, it would further attract people, including those with in-demand skills, who are looking to migrate to WA permanently.

Establishing permanent stamp duty concession for apartments will encourage investment in the market, bringing rental prices down while spurring the demand for apartments.

REIWA President Damian Collins said the importance of investors maintaining a

prosperous and fair rental market was often overlooked.

When investment levels are low, like we have seen in the past year, the brunt of the market falls on tenants, with fewer available rentals and rising rent costs.

This increased demand for apartment investment would also provide the kick-start needed for recommencing some, if not all, of the 10,000 apartments currently on hold in WA.

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