Colliers International’s Associate Director Research and Urban Economics Quyen Quach said the slowdown in new apartment launches during the past three years, combined with the planning and approval timeframes for new projects to come to market, was likely to create a gap in Perth’s apartment supply.
According to Colliers’ research, close to 2,800 new apartments (in projects with 20 or more apartments) will be added to the market in 2019 but this is forecast to slow to 1,310 in 2020 and 1,060 in 2021, considerably below 1,700, the average number of annual apartment completions in the past decade.
In a move to kick start WA’s residential sector, the government last week announced that buyers who sign pre-construction contracts to purchase a new residential unit or apartment in a multi-tiered development would be eligible for a 75 per cent transfer duty rebate of up to $50,000.
The stimulus will run for two years and will apply to the transfer duty and if applicable the foreign buyers’ duty surcharge, paid on the agreement to purchase an apartment.
Mr Quach said the timing of the stamp duty rebate would provide support to apartment developers with off-the-plan campaigns already underway and those in a position to launch off-the-plan sales in the next 24 months.
“Growth in the apartment market has a significant multiplier effect in WA’s economy and the stimulus package will have the potential to help kick-start some projects, however, some caution is needed with these initiatives as it’s important they are accompanied by polices which aim to boost population growth, like the McGowan government’s recent announcement that Perth is once again to be classified as a regional city,” Mr Quach said.
“This classification is expected to elevate Perth as a destination for skilled migrants and international students and help boost housing demand because transaction and price declines during the past four years stemmed more from historically low population growth than from affordability issues.
“Hopefully, these two policy outcomes will intersect nicely, and population growth will continue to accelerate as new apartment supply comes online.
“What we wouldn’t want to see are policies that are heavily weighted to adding new supply, because a temporary spike in building activity, in excess of real housing demand, could result in a longer recovery period.”
Mr Quach said Perth was already the most affordable residential market amongst the nation’s capital cities and the rebate would make it even more attractive for local, eastern states and foreign buyers wanting to secure an apartment at an opportune point in the market cycle.
Willie Lim, Manager Residential Sales and Marketing – Asian Markets, welcomed the rebate package and said any saving was a plus in a cautious market.
“A significant section of the buying market is not transacting and the rebate will help some people make their buying decision, especially first home buyers who are a big percentage of the market and may not have been considering an apartment as their first home,” Mr Lim said.
“With supply slowing for several years, Perth’s apartment market was on track for a new supply cycle to start and the arrival of the stamp duty rebates should dovetail nicely into that new supply.”
Greg Billings, Senior Sales Executive, Residential Sales and Marketing, said the rebate would help to offset two big obstacles in the apartment market—the surcharge for foreign buyers and stamp duty for downsizers.
“Foreign buyers are significant because they help underpin the apartment market and stamp duty costs have been a disincentive for downsizers who like to buy and sell in the same market and are less familiar with buying off-the-plan,” he said.