New data from Urbis has revealed that the average price for new apartments in Perth has continued to climb, recording the highest quarterly price on record in the history of their Apartment Essentials Report.
The Report showed that the average price for newly completed apartments rose to $926,000 in the first three months of 2023 – marking a considerable 10.8% uplift from 12 months prior.
We spoke to our Head of Development, Philip Anderson, to discuss what’s driving this increase, and what it means for Perth apartment projects moving forward.
Prices increases are two-fold
Asked what’s driving the upward trend, Philip said the increases were two-fold:
“These price rises are in part a reflection of the high-end nature of the completed stock that is currently transacting in Perth, which makes sense given that smaller-scale luxury developments have been the primary product that has stacked up from a feasibility perspective over the past 12-18 months,” he said.
“However, they are also indicative of the considerable shortfall we’re seeing in newly completed stock, which comes on the back of a prolonged downward trend in apartment approvals and apartment commencements that has been further exacerbated by supply chain issues and cost escalations following the COVID-19 pandemic.”
The latest Urbis Essentials data showed there were only 485 completed apartments available for sale in Perth in Q1– less than half of the 1,208 completed two years prior.
“While stock for sale has reached a decade low, we’re also seeing increased demand on the back of rising migration, with these factors combining to place upwards pressure on prices” Philip adds.
Looking forward, the situation shows little sign of easing.
Recent State Budget forecasts point to population growth of close to 2% over the next four years, equating to an additional 206,000 residents annually.
Philip explains: “We’ve crunched the numbers and found that an estimated 26,000 new dwellings need to be constructed each year to meet market demand based on population forecasts.”
“As it stands, we’re only delivering on 14,000 of these, which is leaving a significant annual shortfall of 12,000 dwellings, so we’re not expecting price growth to slow anytime soon.”
Image: The Brixton by Westbridge Urban
Growth reflected in recent Westbridge sales
Discussing the impact of these conditions on our developments at Westbridge Funds Management, Philip said: “It’s definitely something we’re seeing reflected in recent sales for our apartment projects nearing completion.”
“As an example, our Wright Street Residences in Highgate, which are due for completion in July 2023, achieved three sales in April which exceeded our 2021 price expectations by 23%, 37% and 46% respectively, while a 2 x 2 apartment at our Brixton development in East Victoria Park just sold for $699,000, marking an uplift of 34% on its original pricing in 2019.”
Apartment opportunities to return in late 2023
While price increases are benefiting sales revenues for newly completed stock, Philip says they also hold important implications for new apartment developments – many of which have been put on hold as escalating costs have worn down viability.
“As demand and supply dynamics continue to put upwards pressure on apartment values, we’re going to see the feasibility of these projects return,” he said.
In terms of how this will impact our investment strategy for new acquisitions, Philip said: “From an investment perspective, we’re expecting these conditions to open up significant opportunities in the apartment sector in late 2023/24.”
“However, we are also highly cognizant of the challenges posed by elevated build costs and will be remaining very selective in our criteria.”
“Our market analysis shows a key opportunity in Perth’s premium suburbs, where high demand, high amenity and high sales values will justify build costs and drive potential for stronger returns,” he concludes.
Image: Wright St Residences by Westbridge Urban
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