‘No longer viable’ to build apartments in sprawling Perth

“While it doesn’t cost a lot less to build a smaller apartment in a less premium area, the price people are willing to pay is substantially less,” the report said.

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“These more affordable developments simply can’t proceed in the current environment.

“Contrary to the common rhetoric, margins are not driven by ‘greed’; there are minimum thresholds necessary for securing project finance and managing risks.”

The report blamed the climbing and highly volatile construction costs driven by labour shortages and competition for labour from government and mining sectors.

It estimated that post-COVID construction costs had risen 30 per cent nationally, with even higher rises reported in WA, where infrastructure spending had more than doubled in the past five years thanks to major public works projects.

“Anecdotally, developers are reporting that construction estimates are now almost double the cost of similar developments five years ago,” the report said.

It anticipated costs would only climb as a new national construction code and bargaining agreements took effect.

The report argued that as households struggled and developers sat in “holding patterns”, state-based property tax revenue had doubled in five years to $4.5 billion and should be reinvested in housing initiatives, not more labour-guzzling government projects.

The report said the government needed to extend the current Infrastructure Development Fund rebates, review developer community contribution rules, review land taxes and make current transfer duty concessions for off-the-plan and under-construction developments permanent.