Developers of smaller apartments projects across Perth say some of the state government’s recent measures to stimulate economic activity and employment in light of COVID-19 are good in theory, but may not meet expectations in practice.

Among the measures is a streamlined assessment process for ‘significant developments’, defined as those projects with an estimated cost of at least $30 million or new residential buildings proposing more than 100 dwellings.

Developer and architect Barry Baltinas hopes the approvals process for the smaller, high-end apartment projects he focuses on could also be streamlined.

“These smaller projects can get off the ground very quickly, helping to create jobs and incomes for Perth families at a time when that is very much needed,” Mr Baltinas told Business News.

“Now more than ever, buyers are putting their health and the health of their family in focus, and boutique living aligns with that.”

Baltinas’s latest project, the $19 million Habitat Residences in Applecross, recently completed construction and features 14 apartments and three penthouses.

Mr Baltinas said the lack of shared facilities at the projects had proved to be a drawcard, particularly in recent weeks.

“It not only means fewer maintenance costs, but brings fewer health implications, which is obviously top of mind for many buyers right now,” he said.

“We’re seeing more activity in the market, in particular from those downsizers who have not been greatly impacted financially by recent events.”

M/Group managing director Lloyd Clark said there had been a lot of speculation about the potential negative impact of COVID-19 on the property industry, but the company’s apartment arm Match, which mostly develops 30-40 dwellings over three to five storeys, had not adjusted its pipeline.

“Boutique product holds its value,” Mr Clark told Business News.

“It’s important to note that the apartment market is heavily impacted by continued population growth, and an emerging generation that values central urban living over the half-acre block.”

Mr Clark said this would continue to increase demand for quality product in desirable locations.

“If the government’s mandate is to stimulate the economy and fast track project development, it needs to approach all areas of the property sector equally,” he said.

“We believe it is absolutely counterproductive for the government to favour one style of dwelling over another in any capacity.

“There is a whole market sector that would never consider high-density living, so disadvantaging them with time delays does not service anyone.”

Excerpt from Business News – 22 June 2020

Prices and sales of apartments are stable, but developers are calling for more stamp duty reform.

Western Australia’s property developers hope the physical isolation that has helped mitigate the worst of COVID-19 in this state will also insulate the local apartment market from a contagion of a different kind.

While sales of off-the-plan apartments on the east coast are reportedly down 15 per cent or more in recent weeks, that trend is yet to fully materialise in Perth, at least anecdotally.

Apartments in central Perth have remained relatively resilient during the past three years in terms of maintaining their resale values, according to research analysts PropertyESP.

Director Samantha Reece said this resilience, paired with Perth’s location, had so far buffered the market from the economic fallout of COVID-19.

“For the first time in history we are actually glad that we’re isolated,” Ms Reece told Business News.

“While there will be some national companies that feel the effect from the east coast – there is a bit more of a lag happening there than here – those companies based in WA, I believe, will actually continue on business as usual.”

That appears to be the case for Subiaco-based Stirling Capital, which recently achieved practical completion at its 26 on Charles mixed-use development in South Perth.

Stirling Capital sales and marketing director Daniel-Paul Filippi said just a small number of the 28 boutique apartments and four levels of commercial office space remained for sale.

“In terms of valuations, we’ve had zero impact,” Mr Filippi told Business News.

“I’ve had all the major valuers through our Charles Street project and we’ve had no problem.

“People are waiting to see if there’s going to be those sorts of big drops that have been reported [on the east coast]. We didn’t have a lot of foreign buyers anyway, so I don’t see as much impact.”
Mr Filippi said the market’s saving grace could be the resources sector, as one of the key drivers of the state’s economic activity.

“The fact is, WA is still ticking along, so everything is indicating that maybe WA and Darwin will be the least affected by all of this,” he said.

M/Group managing director Lloyd Clark said there had been less disruption on projects than initially anticipated, with inquiries returning just as quickly as Perth moved through the easing of restrictions. Mr Clark said inquiries had also tended to be more qualified and ready to buy.

Given that market confidence, the group is pushing ahead with plans to start construction on its M/27 apartment development in Fremantle.

“In terms of valuation, Perth is in a unique position comparative to the rest of Australia,” Mr Clark said.

“Our property values were already at the lower end of the property cycle, and apartment prices currently represent excellent value for money.

“While the fallout of the pandemic might create value variances in other states, I believe it is unlikely in Perth.

“In light of the activity over the last few months, I would expect to see apartment prices on our projects hold as the market restabilises and returns to growth in 2021.”

M/Group is progressing plans to start construction on its M/27 40-apartment development in Fremantle.

Apartment developer Paul Blackburne is also expecting prices to remain steady, and said COVID-19 had not yet affected sales, with most of his apartment stock already sold.

Blackburne’s Marina East development, located in Ascot Waters, finished construction in May with 80 per cent of apartments sold.

“The past 12 months have been our highest-selling year on record with $203 million in sales in just the first nine months,” Mr Blackburne told Business News.

“Now that things are opening up more and the major threat of the crisis is most likely over, people have started buying in larger volumes.

“Prices had gone up for four months in a row. The next year would have seen 3 to 5 per cent growth.”

Outlook Data compiled by real estate services firm JLL revealed that apartment sales in the inner city were down 3.9 per cent in the 12 months to the fourth quarter of 2019.

However, apartment sales activity was up 12.5 per cent in the fourth quarter on the preceding three months.

JLL manager of strategic research Ronak Bhimjiani said this had most likely been fuelled by the 75 per cent stamp duty rebate on off-the-plan purchases.

Additionally, Mr Bhimjiani said apartment values increased by 1.7 per cent in Perth between November 2019 and February 2020, a figure not seen since mid-2013 during the peak of the resources boom.

“The long-awaited recovery in Perth’s apartment market is likely to be delayed, as COVID-19 keeps conditions challenging in the short term,” he said.

“However, it is important to note that current economic and property market data does not yet fully capture the full impact of COVID-19.”

Any anticipated drop in demand could be partially offset by supply, with construction expected to cool off beyond 2020.

Mr Bhimjiani said there were about 380 apartments across a handful of smaller boutique developments likely to be completed in 2021.

Meanwhile, for larger developments previously set for 2021 completion, he said project timelines had been pushed out to 2022, with further economic uncertainty potentially limiting new starts.

“Many of these projects that are in the early stages of marketing or at the development approval stage could slip into later years or be abandoned if sufficient pre-sales are not achieved and economic conditions do not improve,” Mr Bhimjiani said.

“The impact on pricing will ultimately be dependent on the supply versus demand dynamics in the Perth apartment market.”

Finbar managing director Darren Pateman said stamp duty relief would be the best way to boast sales and development activity.

The ASX-listed property development company recently announced it had completed construction of its One Kennedy Maylands project, with sales of $23.5 million secured to date, representing 43 per cent of apartments.

Mr Pateman said there hadn’t been any immediate shift in apartment values, with all recent Finbar contracts at pre-COVID-19 pricing.

“The Perth market was already at one of its most affordable levels pre-COVID, in contrast perhaps to eastern states markets, which were experiencing far higher levels of growth,” Mr Pateman told Business News.

“WA has done it tough for near on five years and pre-COVID we were clearly entering a recovery phase, while eastern states markets have been boiling over for some time.

“Extending the stamp duty rebate beyond off-the-plan sales to projects under construction and new completed stock to encourage commencements will allow vital capital to be redirected to new job creating projects for thousands of Western Australians.”

Mr Pateman said this would help revive the WA economy as it moved into the recovery phase post COVID-19.

Mr Blackburne shared similar thoughts and said further stamp duty reform could also lead to long-term reductions in local council rates, with the greater rates flowing from higher-density developments better supporting council operations and budgets.

Mr Clark agreed and said the role of government was critical to maintaining buyer confidence, which could be achieved by additional stamp duty relief by way of rebate or discount.

“This is about keeping the market moving in the right direction and buyer incentives are proven and successful in this space,” he said.

“Government and industry alike have a significant role to play here.”

Business News – Katie McDonald, Thursday, 4 June, 2020