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Are apartments in oversupply in Perth?

Apartments comprised only 17.8% of all sales in Perth in 2013 and there has been much debate recently in regards to the sustainability of Perth’s Apartment construction boom. Housing approvals have reached the highest levels since 2006.  Both units and houses have shown strong growth over the recent growth cycle in Perth.  Capital gains since the last market trough in Perth show units have grown 14.8% and house values 14.2%.  Now the rental returns are on the slide and vacancy rates are the highest they have been for 4 years questions are being asked about oversupply.

RP Data research reveals WA had the sharpest upturn in dwelling approvals across the nation in 2013 with a 33% increase over the year.  However the Perth apartment approvals in 2013 have comprised just 23% of all these approvals.  This is relatively small compared with other capital cities: 

% Apartment approvals compared with all dwelling approvals in 2013
Sydney - 68.9%
Melbourne - 53.1%
Brisbane - 59%
Perth – 23%

Interestingly the Perth apartment market is proportionally the smallest of any capital city in regards to dwelling sales. 

% Apartments of all dwelling sales in 2013:
Sydney - 40.7%
Melbourne – 29.7%
Brisbane – 29.2%
Perth - 17.8%

Supply is increasing in regards to properties on the market for sale and is now the highest it has been since December 2012.  This provides apartment buyers more choice and an opportunity for discount buying.  Although rents are down in comparison to the recent yields achieved, property investing is for the long term.  The market is cyclical; careful asset selection is vital no matter what market you are buying in.  With the long term predictions for Perth there are many reasons for investors to remain confident.

We would encourage investors looking at apartments to do their homework to determine what supply is coming to the market in the area they are considering investing in – areas with a lot of supply coming on  or developable land that potentially create an oversupply had  greatest risk.  As household numbers decline (almost 60% of households are made up of two or less occupants) this indicates a demand for well located apartments that have unique aspects and are close to conveniences.

Can we help you find an apartment?   Please contact us. - Rob Walker

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