The apartment sector may be going through its own cyclical high, but developers are banking on a long-term growth story.
The apartment sector may be going through its own cyclical high, but developers are banking on a long-term growth story.
SURGING growth in apartment developments has come at a good time for Western Australia.
Just as the plunge in commodities prices turned the tap off on the resources sector development pipeline, demand from property buyers for high-rise living has provided something of a buffer.
While the skills and experience in developing mines and building apartments may only have a nominal overlap, there is certainly a benefit in having this important part of the economy fired up as another, bigger, field grinds to a halt.
Naturally, Business News is wary of the consequences of overheating in residential high-rise construction, based on experiences here and in other markets.
The risks are obvious. Apartments have long lead times and the demand signals that have prompted this current wave of development started when the resources sector was still strong, prompting population and wages growth. Many of those new residents have come from markets more familiar with apartment living, however few had experience of commodities cycles.
But demand has been sustained well beyond the early warning signs of the resources bust.
Our economy has taken a hit, but developers are going ahead with projects worth billions.
They are working on a different cycle; in the case of Perth it is the maturation of a city from a huge sprawl of single-storey, stand-alone dwellings to one that accommodates far more people in its inner city through the mechanism of high-rise towers.
This is a natural development, dependent on factors such as available land and the expectations of property owners. But as Perth has stretched, the costs to new residents for being on its outskirts has started to outweigh, for many, the desire to own the land upon which their house is built.
These days, people are less and less interested in long commuting times in congested transport corridors, especially if their home no longer has the feeling of space around it. Cheek-by-jowl houses are little more than apartments laid on their sides, without the benefits of shared amenities.
Furthermore, other demographic factors are at work.
Firstly, Perth may be experiencing a slowdown in the population growth of the past decade, but every study suggests an additional 1 million people (at least) will live in the state’s capital in 20 years or so. To meet that demand, Perth needs to go up, more than out.
Secondly, the ageing population is bringing to a head the need to diversify our inner-city suburbs. In many cases, the biggest blocks of land in the metropolitan area are close to the CBD and have been in the hands of their owners for decades.
As those people retire and seek to downsize, they want to capitalise on the value of their asset and remain in the area they are familiar with. Selling their subdivisible quarter acre block and moving to a new apartment complex nearby is a neat solution to that problem.
But recalcitrant councils and lobby groups opposed to progress need to get with the program.
In many cases, those most anti development are hypocritical opponents of high-rise, as they are often the same groups demanding more sustainability, which is something apartments typically deliver in net positive terms through many efficiencies in construction, operation, and localised demographic change.
Perth is made for apartments. Its ample coast and river frontage are exactly what high-rise owners want, because one of the great advantages of going up is the view it can offer – and one of the great views to offer is over water.
To suggest this is elitist in favouring those with wealth, as is often the case, is ignoring the fact that, with the current height restrictions and other regulatory obstacles, water views are far more the enclave of the elite than in the high-rise alternative.
Of course, governments and developers need to be sensitive to other landowners and other land uses, but stubborn opposition to progress on the basis of nostalgia is a narrow view that is out of touch with what more and more Perth dwellers want.
