Developers may have an increasing focus on community, sustainability and affordability, but ultimately their focus remains bottom-line profits.
Developers may have an increasing focus on community, sustainability and affordability, but ultimately their focus remains bottom-line profits.
For developers, the cost of creating housing is integrally linked to being able to provide the product at an affordable price for consumers, and if something is more expensive to create, it is only natural that more will be charged for it.
Western Australia’s latest building boom has led to a rapid escalation in construction costs, which has made broadacre developments more affordable to provide than apartments, a housing option many developers are increasingly reluctant to take.
WA-listed developer Cedar Woods last year fell victim to rising construction costs, forcing it to go back to off-the-plan purchasers of apartments in its Nautilus development and ask for an increase in purchase price.
Satterley Property Group managing director and chief executive Nigel Satterley said the cost of building apartments or commercial property in Perth was more expensive per square metre than Melbourne, which was a real concern for the industry.
“I think it is going to be very hard to stop urban sprawl, and if the costs keep going up, density won’t be affordable. I don’t believe people want to live in that sort of environment,” Mr Satterley said.
“In 1974, Robert Holmes a Court rang me and asked if I could come to a place up near Wanneroo. We went down Ocean Reef Road, and I said to Robert: ‘why would you want to be chairman of this; in our lifetime we will never see this area developed’.
“Of course, Joondalup had been and gone, sprawl will just keep going.”
Peet and Company managing director Warwick Hemsley said the cost of medium density and high rise was, for a range of reasons, not competitive with a traditional housing style, which presented a real challenge.
“Whereas one would normally look to that style of building for affordable accommodation, in fact, something which might be consider-ably smaller than a house costs as much or more than a house,” Mr Hemsley said.
Stewart Kestel from Hegney Property Group said affordability was a major aspect for the whole market, and that there was a big market for apartment living.
“People will live where they want to live, and will pay the amount of money they need to pay to live where they want,” Mr Kestel said.
“There is a big market for apartment living, but people are chasing apartment living for a lifestyle; that is, their second living areas are no longer in a lounge room or the formal dining room, it’s the cafes and restaurants in close proximity.
“A prime example is the South Perth/Como area, which has been traditionally quite good with investors, and seen to be an older area with older units.
“Younger people and professionals are buying in there and renovating units.
“We have just seen the highest price paid for land in the metropolitan area in South Perth. That to me says higher density, which comes with lifestyle benefits, is what the market wants.”
GHD business development manager Ian Johnston said the debate over affordability often overlooked the fact that Perth was a city of about 1.5 million, not four million.
“Perth does have pretty affordable land and housing, albeit it is rising but I think on a global scale it is quite affordable,” Mr Johnston told the property forum.
“We do have a development industry in Perth that has been able to provide reasonable affordable land and housing and there isn’t the pressure on land that there is in other large cities in the world.
“Perth is different, yet we seem to be having policy responses from other cities with other problems and saying ok, that is what we will do for Perth, but in fact Perth is different.”
