The West Australian, Wednesday 27 September 2023

WA apartment approvals plunge to lowest level since 1983.

Perth is at risk of becoming a “developer’s graveyard” unless more incentives are introduced to kickstart apartment projects, as startling new ABS data reveals unit approvals in July plunged to their lowest level since records began in 1983.

Industry experts are calling for the foreign buyer surcharge to be abolished to lure overseas investors back to the State following the latest WA trends data which showed unit approvals hit a record low of 55 in July, down from 78 in June and 268 the same time last year.

Limnios Property Group managing director James Limnios said the approvals figures confirm the severe shortage of new off-the-plan developments and that the city was being transformed into a developer’s graveyard at a time of an unprecedented housing crisis.

“Currently there are a huge number of residential development sites around the inner-city area that have been lying idle for years because developments cannot get their feasibility to work due to the exorbitant construction costs, labour shortage and pre-sales to get them under way,” he said.

Mr Limnios, pictured above, believes one measure that should urgently be considered is abolishing the overseas buyer’s tax, which is an additional transfer duty of 7 per cent.

“It has played a major role in discouraging overseas buyers in investing in new of- the-plan projects since it was introduced in 2019,” he said.

Mr Limnios also called for investors to be further incentivised, such as introducing major reductions in land taxes and council rates during the first five years for buyers who leased out their properties to tenants.

Finbar managing director Darren Pateman said in the midst of a housing crisis and apartment construction across the industry at very subdued levels, the removing the foreign buyer surcharge would directly assist supply through underpinning off-the-plan pre-sales for new projects to start.

“The foreign buyer surcharge is having a negative impact on the State Budget given the sharp decline in Foreign Investment Review Board sales that occurred with its introduction,” he said.

“Finbar saw a 71 per cent decline in FIRB sales in 2020 financial year when compared against our five-year average of FIRB sales prior to the surcharge being introduced, and the 2023 financial year was still 44 per cent down.”

In addition, Mr Pateman, pictured inset far right, said FIRB buyers had played an important role in the supply of rental apartments with Finbar’s inhouse rental management division Finbar to Rent noting that 70 per cent of its recent FIRB owners had leased their apartments into the general market.

UDIA WA chief executive Tanya Steinbeck said the latest ABS dwelling approval figures reinforced that there was a particular shortfall of supply in the medium and high-density housing sectors and given the current crisis, supported a range of measures to get more housing supply to the market. In relation to the apartment market specifically, encouraging investment by abolishing the foreign buyers surcharge, as well as making the off the plan duty concession permanent and extending it to include apartments under construction are recommendations supported by UDIA WA,” she said.

Ms Steinbeck also warned that construction costs and the minimum uplift in dwelling prices would continue to be a barrier to making apartment projects financially viable.

“It is a wicked problem and we need to look at a range of options to ensure we are streamlining the costs associated with construction and delivering projects to market, that includes strategic infrastructure delivery and minimising red tape so that time frames are not blowing out,” Ms Steinbeck said.

Edge Visionary Living managing director Gavin Hawkins said the stamp duty rebate had been a fantastic initiative to make buying off the plan more appealing but one concern from the industry was that once construction began, projects became less competitive given the rebate was lost.

“This issue is more acute at present given the difficulty developers face in making developments commercially viable,” he said.

“The extension of the stamp duty rebate for all sales post construction would allow developers to clear stock and look at creating future projects leading to potentially more housing supply.

“The other key factor that the local market would like to see is either the elimination or reduction of the foreign buyer’s surcharge, which has raised little in the way of additional stamp duty revenue whilst being a major impediment for foreign buyers,” he added. Mr Hawkins said foreign buyers, at least in the apartment space, were generally investors and could really assist in helping projects be successful, again leading to greater housing supply to the market.