Is Perth’s oversupply of apartments “overstated”?

Perth’s construction of apartments and its surrounds has recently increased significantly, says RE/MAX WA managing director Geoff Baldwin.

However, he says that beliefs there is an oversupply coming are overstating the problem and are unlikely to come true.

“The property development industry is now much more regulated and sophisticated than it has been in past cycles and this has come about through hard lessons learned, not only by the developers themselves, but by the lenders that finance these projects,” said Baldwin.

“Prior to the global financial crisis lenders were much more liberal in their financing of prospective developments however today it is almost impossible to achieve financing without the developer having substantial equity in the project and certainly not before a majority of the apartments are sold off the plan on unconditional contracts.”

He notes that without 60% or 80% unconditional presales, the developments will not begin construction, and so, unlike in the past, developments that do not have the associated demand will not come to fruition.

He also noted that with most developments, they are sold out completely prior to construction leaving no flood of new stock to the market.

“It also must be taken into account the massive shift towards high density, low maintenance, secure living that is seeing an increasing number of people move away from the suburbs and into an apartment closer to the city.”

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