WA apartment developers join “Lehman moment”

By Leith van Onselen

Yesterday, it was Brisbane apartment developers that had their “Lehman moment”, with a marketer offering “Sizzling Hot Deals” in the form of discounts of up to 39% on apartments in a newly-completed residential development.

Today, we have WA apartment developers struggling for pre-sales and offering increasingly generous incentives to lure buyers. From The ABC:

Developer Mirvac is offering up to 1 million frequent flyer points – equivalent to three business-class return trips to Paris – for buyers of its Claremont and Leighton Beach apartments.

Last month, Mount Pleasant-based developer Norup Wilson was offering luxury cars to buyers of its apartments in the same suburb.

Other developers, such as Frasers Property, are offering to pay the equivalent of a year’s worth of interest on the purchase price of an apartment.

Momentum Wealth managing director Damian Collins, who runs a property investment consultancy, said incentives could be worth up to 6 per cent of the purchase price.

“Over the last couple of years, it’s been really hard for developers to get pre-sales off the ground,” he said.

“Even with good marketing, buyers have been reluctant to commit to anything. There’s been a lack of confidence.”

Mr Collins said incentives were being used throughout the sales process, from off-the-plan offers to deals on unsold apartments in completed projects…

MB’s latest member’s special report, Light at the end of the mine shaft or oncoming train for Perth housing?, revealed that Perth unit prices peaked in June 2014 and had fallen by 9.8% as at December 2016, when averaged-out across the four main data providers:

Perth Unit Prices

However, when adjusted for inflation, Perth unit prices were down 15.9% from their March 2008 peak as at December 2016:

Perth Real Unit Prices

ABS data also shows that high-rise apartment construction in WA has boomed over recent years:

Just as population growth in WA has crashed:

Best to avoid these apartments like the plague.

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Unconventional Economist

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