- Owning a house is nearly impossible for the average first-time buyer in Perth.
- High-density living is the more viable option due to affordability concerns.
- Due diligence in apartment buying is crucial as protections are sparse in WA.
Let’s face it, it’s nearly impossible for a first-home buyer to buy a house.
According to SQM, the weekly asking property price of houses is around $960,000 in Perth as of March 2024.
That’s the price for what we call a ‘relatively affordable market’.
Perth weekly asking prices
In Sydney, the figure explodes to a mind-numbing $1,900,000.
Sydney weekly asking prices
Bananas.
High-density may soon be the only option for first-home buyers
Now, for the rest of us, average Australians earning average incomes, owning a house as your first home is a delusion.
Yes, yes, we all know the story about some hero turned buyer’s agent who transfigured the coins and chips under their couch into a $10 million dollar property portfolio.
But unless you have a spare million or two stuffed within the asbestos-insulated rotting walls of the decrepit property you’re living in, or rich parents, you’ll have to compromise.
No, it won’t be that beachfront property in Cottesloe you’ve dreamed of since primary school.
No, it’s not going to be property contemporarily designed by an architectural who’s who in Dalkeith.
If you insist, you might be able to afford one of those samey off-the-plan suburbs in the middle of the literal desert, a mere hour and a half away from your work.
You could also buy a respectable apartment for the same price.
Most industry experts believe that high-density living and apartments are the future, and many Australians are being pushed towards units due to affordability concerns.
Hence, The Property Tribune spoke to Urbis’ director of property economics and research, David Cresp, asking his thoughts on purchasing apartments in Perth.
Location, location, location
“Location is always a key factor in any property decision. Key things we consider for an apartment location are population, employment, and infrastructure,” Cresp said.
“Ideally, you want a location with a local population that is attracted to apartment living. A location with infrastructure around it, such as being close to public transport, retail, and food and beverage.
”Also, a location close to employment centres will also help drive demand.”
While many warn about the perils of steep strata fees and dodgy strata management, Cresp argues that these concerns have been overblown.
What apartment naysayers don’t consider is that house maintenance can also be expensive and labour-intensive.
“Whilst strata fees are certainly something to consider, the fact that they are very transparent can sometimes make people overly worried about them.
“What people often don’t realise is how much they spend on repairs, maintenance and their gardens when they live in a house.”
“Living in an apartment means that you don’t need to do the regular trips to Bunnings, save up to paint the outside of your house or pay for building insurance. All these costs add up, but people often don’t take this into account when they consider strata levies.”
David Cresp, Urbis
Is buying an apartment off-the-plan safe?
Considering the supply issues in Perth, more off-the-plan apartment developments have been popping up.
Aesthetically pleasing websites showcasing Perth’s stunning skyline, promising luxury, lifestyle, coastal living, and resort-style facilities. AI-generated renders screaming; this could be you.
And, generous concessions if you buy now.
I’d know. As a consequence of writing this article, my social media feed has been plastered with an endless barrage of these advertisements, having simply thought about off-the-plan apartments while scrolling through Facebook, Twitter (now X), and Instagram.
However, as we all know, opinions on off-the-plan developments are divided.
Nevertheless, Cresp is more optimistic about off-the-plan apartments. He contends that buying an apartment off-the-plan is safe, provided you have done your due diligence, with the added benefit of securing prices today before they inevitably rise.
“We are in the midst of a housing crisis and not able to produce enough housing to keep up with demand. Construction costs have seen a huge jump up, and these cost increases, together with a lack of builders able to build apartments, mean that apartment supply is also falling,” Cresp said.
“Where property prices are increasing, as we have seen in the Perth market in recent years, buying off-the-plan does give you the opportunity to lock in at today’s prices.”
David Cresp, Urbis
“However, it is important to consider the developers’ track record and history of delivering. Ask about what they have developed in the past and go and have a look at it.
“There are a number of local and national developers in Perth who have a very strong track record of delivering quality apartments.
“The key thing is understanding what the developer’s vision for the development is and ensuring that they have the capability to deliver it. If there is a building appointed, understanding what the builder’s track record is also an advantage.”
Doing your due diligence when buying an apartment
Australian Apartment Advocacy (AAA) founder and CEO Samantha Reece is no stranger to the woes of WA’s apartment owners. The self-declared Apartment Ombudsman, Reece represents over 2.5 million apartment owners nationally, having originally started the non-profit organisation in WA.
Most recently, she wrote an opinion article for The Western Australian, where she called for the State Government to enact better protections for WA’s apartment buyers.
Hence, we asked her how would-be apartment buyers can best protect themselves before purchasing.
“You want to make sure that the builder is experienced in apartment construction and has not phoenixed any of their previous companies,” she said.
Phoenixing occurs when a failing or insolvent company shuts down and re-emerges as a new company with nearly identical assets, personnel and business model.
Here, the failing company transfers its assets and personnel into the ‘new company’ before declaring bankruptcy, leaving its debts with the asset-free old company while operating as a new entity with all its previous assets intact and little to no debts.
“At the moment with a shortage of construction partners, some developers are engaging builders that have no experience in the apartment sector. This is concerning as apartment construction is complex.”
“The AAA Apartment Buyer and Owner kit outlines the top tips to check for both build quality and developer reliability.”
Samantha Reece, AAA
Reece noted that one common apartment ownership pitfall is owners’ not accounting for strata fee increases.
“Buyers don’t realise that the strata levies will increase substantially from year one to year two as the defect liability period and warranties conclude after 12 months. Always ask for a three-year projection for strata fees.”
The AAA CEO stressed the importance of engaging an independent inspector to inspect the building for defects before settling.
“Also, make sure that you engage an independent inspector to inspect your apartment and build, as you legally don’t have to settle on an apartment with defects.
“Make sure you action any defects with the builder in the first 12 months and take the matter to the Department of Energy, Mines, Industry Regulation and Safety (DEMIRS) if the builder does not respond. Take prompt action to ensure that the defects are rectified.”
For those insisting on buying off-the-plan, read the fine print.
“Only 14% in the 2023 Apartment Living survey (that spoke to 2,000 owners) felt comfortable buying off the plan. Make sure the sunset period is no longer than 36 months, and have a lawyer check the contract. Sometimes buyers unknowingly delegate their voting powers to the seller for the first 12 months etc – so make sure you know what you are signing!”
