Straining under demand: The challenges facing Perth’s construction sector
With the city’s construction sector struggling to keep up with increased demand, an industry expert has called on the Western Australian government to urgently address development barriers to boost housing supply.
As Perth’s average price of land climbs to new heights and interstate immigration to Western Australia surges, regional manager for Western Australia, Perth at consulting firm Inhabit Group, Lui Violanti, has warned that the state’s construction industry is struggling to meet the increased demand.
Surging population growth in Perth
Violanti linked Perth’s recent record-high average price for a new block of land, which now sits at $305,177 according to the Urban Development Institute of Australia, to a broader shortage of land across the state, which has recently been intensified by a swell of interstate immigration to Western Australia.
Speaking on the state’s steady population growth, Violanti highlighted Perth’s lower median home price compared to Sydney and Melbourne, and the city’s “better employment opportunities” as significant drivers of interstate migration.
He explained that Perth’s growth in population resulted in the urban sprawl extending further north and south of the city, with the necessary infrastructure development in these regional and rural areas driving land costs up even higher.
In order to accommodate more residents, Violanti stated that lot sizes in Perth are reducing to increase density in suburbs, and mirroring Sydney and Melbourne’s housing markets by strategically situating new urban housing developments alongside public transport routes and retail shopping hubs.
Perth’s unique development landscape
However, Violanti noted that Perth’s market is different from the larger capital cities in regard to the greater amount of land available for development, which he said has resulted in Perth developers “land banking for future corridor growth”.
Violanti also said that Perth’s market has diverged from the larger capitals in the sense that apartment living in Sydney and Melbourne is “largely driven by high property prices”, while in Perth, the shift towards apartments is instead “more of a lifestyle choice”.
“Developers in Perth are curating offerings that cater to this lifestyle change, focusing on quality rather than squeezing apartment sizes to maximise yield,” Violanti said.
Action required from the Western Australian government
Despite the emerging popularity of higher-density living in Perth, the regional manager said that construction efforts are still hindered by “layers of government and planning red tape”. In his view, there has been a lack of clarity around what kind of building the government will incentivise to increase supply.
“Are we talking about traditional house-and-land packages sprawling further into the outskirts, requiring extensive infrastructure such as roads, public transport, electricity, gas, water, sewerage, and additional schools, shops, and services to support new growth?
“Alternatively, does it mean focusing on consolidation and infill, increasing density within existing urban gaps, and making use of current transport hubs and retail centres? Or does it involve exploring diverse housing options such as smaller homes, modular construction, or social housing?”
Were the Western Australian government to clearly outline the strategies it would implement to increase housing supply in Perth, Violanti said that developers would be easily able to navigate local council planning requirements and broadly “rethink their structure plans to align with the government’s vision for the city’s future”.
Financial pressures in the construction sector
Alongside these systemic challenges is the present infrastructure boom occurring in Perth, with Violanti arguing that the wealth of large-scale projects has strained the availability of local contractors and escalated construction costs, making it increasingly difficult to meet housing targets.
One such strategy recommended by Violanti was that the Western Australian government should further incentivise investment in Perth’s build-to-rent sector.
He explained that developers in Perth have struggled in the build-to-rent market due to the long duration required for the return of investment, and stated that superannuation companies have the “capacity to accept the returns over the extended time”.
Through implementing this strategy, Violanti said that superannuation companies will be able to develop mixed use developments and precincts which can then be further built upon by developers.
Stressing the need for the Western Australian government to empower Perth’s construction sector to meet increased housing demand, Violanti emphasised that “it’s time to be courageous and make forward-looking, transformative changes – or accept that St Georges Terrace will continue to empty out after 5pm”.