By David Cresp | 28 May 2024

Despite still challenging conditions for developers, Perth’s population growth pressures are driving the new apartment market again. The Urbis Apartment Essentials reports steady sales have continued after a slow down in 2023. In Quarter 1 2024, 248 sales were recorded despite low levels of supply. This is the highest number of recorded sales since Quarter 4 2022.

Currently only 441 apartments that are recently built are available for sale. A very low proportion when compared to 1,518 apartments that were built and available for sale in Quarter 3 2021.

Urbis Director, David Cresp said that in reality available completed apartments are even lower than the 441 apartments would indicate, “In some of these developments the developer has chosen to take the rental returns or are holding back stock due to the price increases that we are now seeing. We are still seeing a lot of demand for new apartments, however the prices currently required to make apartments viable (generally over $850k for a two-bedroom apartment) are leading developers towards luxury apartments in more premium areas.

Investors are now realising the value that new apartments represent, particularly when buying off the plan in a rising market.

David Cresp View Profile

Whilst many of the buyers continue to be owner occupiers (accounting for 61% in Quarter 1 2024), we have seen a big increase in investor demand over the last six months. Investors are now realising the value that new apartments represent, particularly when buying off the plan in a rising market. We are seeing demand from all types of investors. There has been more demand from local investors but eastern states investors and offshore investors are also recognising the value that the Perth apartment market is offering.”

The difficult conditions for apartment developers meant that in 2023, based on ABS new building approval data (recorded at the time of a building license), only 4% of all new dwellings in Perth were apartments (453 apartments). This is the lowest level seen since 2009 where the proportion of apartments also fell to 4%. This compares to Sydney 27%, Brisbane 23%, and Melbourne 20% of new building license approvals being apartments. “Approvals are starting to improve with Q1 2024 showing more building license approvals than in all of 2023 (508 apartments approved which accounted for 13% of approvals),” said Mr Cresp.

“It has been very difficult to make new apartment developments viable over the past two years, leading to a low level of new project launches,” said Mr Cresp. “Only one new development launched this quarter (with 48 apartments), and there are only 18 developments currently in pre-sales selling (before construction has commenced).” A further 7 projects are pending and due to be launched largely in 2024, delivering 431 apartments.

Construction costs are still going up but we are starting to see them stabilise, This is giving developers more certainty about what construction costs will look like, however it is still challenging to find a builder for a larger development

David Cresp

Unsurprisingly, construction prices continue to be a concern for developers. “Construction costs are still going up but we are starting to see them stabilise,” said Mr Cresp. “This is giving developers more certainty about what construction costs will look like, however it is still challenging to find a builder for a larger development.”

Whilst the Urbis Apartment Essentials report shows there were only eight projects with 600 apartments in developments that started construction in 2023, we have already seen four projects with 569 apartments in new developments commence construction in Quarter 1 2024. “There are a number of apartment developments lined up expected to be starting construction during 2024,” said Mr Cresp. “Our data shows us that an appetite for new apartments is there, developers just need to be able to achieve prices that will make the development viable. This is starting to get easier though with the increase in Perth house prices and stabilisation of construction costs.”

Perth’s house prices have increased markedly, with CoreLogic’s daily home value index recording a 21% annual increase for the 12 months to 15 May 2024, compared to a 9.3% five capital city aggregate. In the most recent quarter Perth home prices have gone up 6%. With house prices on the rise apartments in inner city areas are starting to look more viable again. The Urbis Apartment Essentials recorded a weighted average price of just over $1 million in Quarter 1 2024 for new and off the plan apartments.

“We are starting to see a more diverse range of product being sold this year compared to 2023,” said Mr Cresp. “Though the weighted average sale price is still sitting over $1 million, over 50% of the projects we surveyed recorded an average sale price below $1 million. Additionally, the project that achieved the greatest number of sales (Finbar’s Gargen Towers) was positioned mid-market, proving that where developers were able to provide more affordable apartment product there is strong buyer demand for this.”

2024 will see one of the highest levels of apartment completions in Perth since 2017, with 2,649 apartments currently expected to be completed this year. “Though we expect to see a lot of stock settle this year, 70% of apartments under construction have already been sold so this won’t fix supply issues,” said Mr Cresp.

The 2024 boost in completions will be short lived with the number of completions expected to drop again to 732 in 2025.

“Given the record level of population growth that we are now seeing, Perth’s apartment market supply over the next two years is low,” said Mr Cresp. “With construction costs starting to stabilise and greater confidence in Perth’s apartment market, we should hopefully start seeing new project launches increasing.”

The Perth Apartment Essentials Q1 2024 Report found: 

  • 248 sales were recorded from a sample of 70 surveys in Quarter 1, 2024. This is the highest level of sales recorded since the first quarter of 2022.
  • The weighted average sales price for Quarter 1 2024 was $1 million. However, over 50% of the projects we surveyed (with sales) recorded an average sale price below $1 million.
  • Two-bedroom two-bathroom product made up the majority of sales at 37% of total sales. One-bedroom, one-car apartments made up 30% of sales and three-bedroom apartments made up 23% of sales.
  • Owner occupier sales dominated the market with 61% of transactions. Local investors made up 21% of transactions and foreign investors 15%.  

Get in touch with David Cresp to discuss what’s happening in the Perth apartment market.

David Cresp View Profile