WA-focused apartment developer Finbar Group launched a major project just east of the CBD last month in a test of the current Perth apartment sector.
Happily for Finbar (ASX: FRI) and the broader market, at least 55 apartments have already sold off the plan to kick start the $243 million project, which is expected to commence construction early next year.
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Finbar knows and understands the Perth inner city market well, has a strong and loyal following within the WA market, and clearly pitched the project well.
Garden Towers, situated opposite Queens Gardens in East Perth, will feature a mix of 331 apartments in 1, 2 and 3 bedroom configurations in two residential towers as well as 13 commercial retail, food and office tenancies with a provision for a café and providore in the existing heritage building on the site.
Finbar was perhaps helped by a shortage of any competing, newly-completed apartments in Perth, a cautious return to the market by investors and increasing demand from owner-occupiers for well-located apartments.
Finbar has recorded more than 150 sales since the start of the year across its recently completed project in Dianella; pre-sales at The Point in Rivervale, which commenced construction in March; AT238 in the CBD due for completion this year; Aurora in Applecross and the landmark Civic Heart apartment towers in South Perth.
Earlier this year, a research paper from the Property Council of Australia highlighted the supply issues facing developers in WA.
More than a third of Perth’s approved pipeline of apartment developments – and a further $2.2 billion of apartment projects yet to achieve development approval – are on hold due to skills shortages, according to the research which was conducted with 21 leading apartment developers.
The Property Council said about 10,000 apartments have been delayed, with cost escalations making the projects not currently feasible.
This is reinforced by commentary from REIWA, which says WA needs an extra 8000 homes to restore balance and a further 19,500 homes to be built every year to keep up with anticipated population growth.
Less than 14,000 new homes – houses and apartments – were completed in 2021 because of the supply and cost constraints being faced by developers and builders.
Finbar sees this as a competitive advantage, because it has continued to launch, develop and deliver major apartment projects through the cycle while many other developers have only managed to put up “For Sale” signs in front of empty lots.
The lack of available trades and labour, as well as the rapidly increasing building costs have also hit house builders, meaning the anticipated delivery time for a project home is now comparable to the expected wait time to move into a new apartment bought off the plan.
Cost of living pressures – fuel for long commutes, energy cost for heating and airconditioning – have also made many people consider the advantages of living in an apartment close to existing infrastructure and other amenities.
Perth’s median home price remains the cheapest of the mainland states, and with supply constraints, a return to population growth and the strength of the WA economy, Finbar looks well placed to benefit.