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Perth oversupply fears unfounded

15 July 2014 Stefanie Garber

Despite elevated building activity in Perth, the market is not in danger of oversupply, a senior real estate expert has said.

According to the latest figures from the Housing Industry Association (HIA), Western Australia has the strongest building approval rates in the country.

Last month, a report from Herron Todd White warned overactive development may undercut property values in Perth.

“The Perth residential market is once again suffering from overactivity by investors and developers, especially with regard to multiple-dwelling developments," the report stated.

However, Re/Max WA managing director Geoff Baldwin said stock was unlikely to outstrip demand.

“Our property development industry is certainly influenced by supply and demand, but unlike in the past where slowing demand resulted in oversupply, there are now many safeguards in place to ensure this situation is avoided and this segment remains healthy,” Mr Baldwin said.

In his view, the building industry is better regulated and “more sophisticated” than in previous property cycles.

“This has come about through hard lessons learnt not only by the developers themselves, but by the lenders that finance these projects,” he said.

Stricter financing regulations requiring builders to pre-sell up to 60 or 80 per cent of their units mean projects are unlikely to flood the market with unsold stock, according to Mr Baldwin.

Moreover, more people are embracing inner-city apartment living.

“It also must be taken into account the massive shift towards high density, low maintenance, secure living that is seeing an increasing number of people move away from the suburbs and into apartments closer to the city,” he said.

“We are also seeing a steady stream of overseas property investors snap up inner-city apartments to rent out or to accommodate their children who are attending educational institutions in WA.”

Perth oversupply fears unfounded
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