Supply crisis turns Perth apartments into investment winners

Perth’s booming population growth and record-low vacancy rates have created exceptional conditions for apartment investors – if they can find an apartment to buy.

Aurora Applecross apartments by Finbar

The National Housing Supply and Affordability Council’s (NHSAC) State of the Housing System 2025 report showed higher-density dwelling approvals collapsed to about 67,000 in the year to February – almost 50 per cent below their peak of 123,000 recorded in August 2016.

And with construction costs surging 14.4 per cent in Western Australia during 2024, according to the Australian Bureau of Statistics (ABS), the largest feasibility gap for mid-rise apartments among all mainland capital cities only threatens to get bigger.

The NHSAC report showed that in 2023, developer costs exceeded expected sales prices for the first time in recent years, making projects commercially unviable. When apartments can’t turn a profit, they simply don’t get built.

The cost explosion stems from competition for labour from the resources sector, where workers can command higher wages than residential construction offers. The NHSAC report noted WA had experienced enduring capacity constraints, which continued to drive up building costs well above national averages.

However, Perth’s appeal has never been stronger, with the ABS reporting that the city leads the nation in population growth, creating robust fundamentals for the apartment market.

This demand-supply imbalance has created a rental market so tight that it is driving investors toward existing stock, rather than new development, further constraining supply.

While the banking sector is cautious following the Australian Prudential Regulation Authority’s 2017 guidance on apartment presales requirements initially tightened financing, lenders have recently begun loosening requirements due to competition from non-bank lenders and pressure to boost housing supply.

Despite this easing in financing conditions, developers continue to report difficulties in securing debt financing for many projects, with some resorting to expensive non-bank lenders.

Future-looking forecasts offer little immediate relief. The NHSAC expects higher-density housing supply to remain low through to 2029, with any significant uptick in apartment construction not expected until the second half of this timeframe.

Garden Towers by Finbar (currently under construction)

For existing apartment owners, however, the supply drought has created exceptional returns.

Units delivered yields of 6.2 per cent compared to just 4.5 per cent for houses in the year to the end of March, according to REIWA data, while properties were leased in a median of just 15 days over the same period. Apartment rents have also surged, rising by 82.9 per cent over the last five years.

The supply shortage has fundamentally shifted market dynamics in favour of investors. While new construction remains stalled, existing apartment stock has become increasingly valuable, with strong rental growth and compressed vacancy rates creating a landlord’s market.

If you're interested in investing in a Perth apartment, look no further than WA's largest and most trusted developer, Finbar. With 30 years on the ASX, 79 completed developments and 7,400+ apartments delivered to the Western Australian market, Finbar isn't just a developer; they're a part of the city's foundation.

To find out more about Finbar's current development, visit https://www.finbar.com.au/

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