For the inaugural Y Research Thought Leadership piece, I have chosen to discuss Perth’s apartment market. In the past 12 months a significant amount has been discussed regarding Perth’s apartment market. The result is general agreement that Perth is undergoing a structural change in housing supply.
While WA will remain the bastion of land subdivision, a growing proportion of our future housing will come from apartments. At present, Perth’s apartment market is relatively immature. Y Research’s High Density Apartment Market Report, in partnership with the Master Builders Association, found that as of February, 2015, over 50% of the 19,000 apartments within 5 km of the Perth CBD had been developed since the turn of the millennium.
The Perth of today is more globally connected than the Perth of the year 2000; more West Australians are choosing to be close to Perth’s working, sporting and cultural infrastructure in the Perth CBD. Apartments are becoming the housing more of these West Australian’s choose.
We still have a long way to go. The results of the Y Research/MBA Report showed that just 1.65% of Perth’s two million metropolitan population lived in an apartment within 5 km of the Perth CDB.
The discussion regarding Perth’s apartment market needs to evolve. We need to focus less on the number of apartments being built. We need to focus more on the location of developments.
As the apartment market evolves in coming years, finding a balance between the location of the development and the scale required to meet the needs of Western Australia’s growing population will be a key challenge for the development industry.
To assist in this discussion, Y Research undertook further analysis of the results of our March 2015 Metropolitan Perth Apartment Development Report. This analysis was released at the UDIA’s recent Density Conference and has featured in the West Australian and WA Business News. I can provide a copy of the slide upon request.
The analysis focused on the location of current and future apartment developments based around:
- Public Infrastructure – such as train stations, bus depots and shopping centres.
- Government redevelopment sites.
- Major arterial roads – Highways and major thoroughfares.
- Secondary locations – Typically existing residential areas.
The results highlight that Government redevelopment areas such as the Springs in Rivervale and Claremont Oval play a crucial role in facilitating apartment development opportunities. Over 35% of apartment projects currently under construction are located in Government redevelopment areas. Importantly, these areas are delivering projects of greater scale, at least 43.3% larger, than developments located around public infrastructure and on major arterial roads.
Government redevelopment areas have established a key role in the market place by un-constraining parcels of land that are either heavily fragmented, have contaminated site issues or unsuitable zoning. Many Government sites are transit oriented developments or in close proximity to public infrastructure. The proportion of supply from Government redevelopment areas drops to 30.1% in future projects as Local Government’s unlock sites in close proximity to public infrastructure and along major arterial roads to meet Directions 2031 population targets.
Taller, larger scale projects based around major public infrastructure, redevelopment areas and major arterial roads will become the industry standard. The analysis shows that the scale of future projects around public infrastructure will increase by 227%. Creating housing options in close proximity to train stations, and to a lesser extent bus depots/major arterial roads, is a focus of future development. Creating walkable catchments and reducing the requirements for daily peak time commuting by car is one of the main benefits of infill apartment development. It is easier to create housing options near major employment areas than relocate significant employers to suburban locations, particularly those more than 5km from the Perth CBD.
Over a quarter of current and future supply is located along major arterial roads. While there is a 49.5% increase in scale along arterial roads in future projects, the typical scale of these projects is at least 40% smaller than projects located in Government redevelopment areas and near public infrastructure.
Less than 20% of current supply is being delivered in secondary locations. A major concern for residents is high rise projects in back streets. On current and forecast developments trends there is little evidence of these types of projects. The product being delivered in secondary areas is of significantly lower scale; 55.8% smaller than projects on major arterial roads. As other locations expand, the proportion of future supply proposed for secondary decreases. Importantly, despite major changes in the scale across other locations, there is minimal change in scale in secondary locations, with developments in secondary areas being boutique and low rise (3-4 stories) in nature.
Striking a balance between the needs of a growing city and the concerns of existing residents is the key to the continued growth of apartment development. In the past, there has been strong opposition to apartment developments by the community. This opposition has moderated in recent years as apartment living has gained acceptance and congestion issues have increased. However, a significant NIMBY factor still exists within pockets of metropolitan Perth. As stakeholders navigate change in Perth’s housing typology, high minded ideas are needed by residents in these low rise inner city areas.
Creating housing options close to major employment hubs and public infrastructure, currently enjoyed by a minority of metropolitan residents is crucial to the states growth. If the NIMBY attitude is to be overcome, the development industry must focus on delivering projects in pockets of high rise development that are dense enough to underpin the expansion of public transport services and ground floor retail and commercial spaces. Outside of high rise pockets, developments in secondary locations will remain closer to the fabric of existing communities. This balance will see Perth grow up to meet the challenges of 3.5 million residents as well as retaining the character of the Perth we all enjoy.
We need to sell the benefits of density better.
The increased demand for apartments in future years will bring Perth, the bastion of residential sub-divisions, closer into line with housing trends across Australia and global cities. For a city spread so geographically wide, the only way in the future is up.
To discuss our current or future apartment research, please contact me via firstname.lastname@example.org or linkedin.
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About Y Research
Y Research is an independent property information company that specialises in providing research and high level analysis on Western Australia’s commercial office, apartment, retail, industrial and tourism property markets for Government and private clients. We produce a series of regular market reports as well as custom reports for individual clients.
Information for the article is taken from our March 2015 Metropolitan Perth Apartment Development Report.