Cloudy 2025 view for segment of Perth luxury property market
The rise of luxury apartments along Perth’s waterfront is strong but is it a price trap for investors?
In recent years, the Perth waterfront property market has witnessed a significant surge in the development of luxury apartments.
As the city’s economic landscape evolves and its status as an attractive destination for domestic and international investors strengthens, the demand for premium waterfront living has accelerated.
This trend has created new opportunities but also raised concerns about the potential for oversupply in the coming years, especially as we look towards 2025.
Many of the premium units transacting have views that are driving the premium pricing, but once these views are built out with more construction surging around the waterfront areas, will the values hold strong, or will they falter?
Many buyers are paying for view that they will not keep.
Premium pricing is attributed to three main factors; high end finishes and fixtures, view and location. If you take away the view, over time the interiors will date and while location is still desirable, you may be left with a property that was bought at an inflated price.
Waterfront properties have always been considered a premium investment and views that cannot be built out will hold the top spot in pricing.
Perth’s luxury apartment sector is now experiencing unprecedented growth. Areas like Elizabeth Quay, the Perth CBD, and more recently, the riverside suburbs along the Swan River, are seeing high-end apartment developments aimed at affluent buyers seeking exclusive, lifestyle-driven living spaces.
These luxury apartments cater to a growing demographic of high-net-worth individuals, both from interstate and overseas.
This demand is fuelled by Perth’s vibrant economy, growing tourism sector and interstate travellers heading west for minibreaks. Additionally, there’s an increasing trend of young professionals and retirees preferring inner-city living, driven by convenience, amenities, and the allure of a riverside lifestyle.
Key suburbs for luxury waterfront apartments
Several suburbs in Perth have become hotspots for the construction of luxury waterfront apartments. Among these, the following stand out for their development potential and price points:
Elizabeth Quay (Perth CBD): Elizabeth Quay is arguably the most prominent waterfront development in Perth. It boasts some of the most expensive real estate in the city, with apartments commanding upwards of $1.5 million for a two-bedroom unit. This area continues to attract high levels of investment thanks to its central location, public amenities and proximity to major transport links.
South Perth: This suburb offers unparalleled views of the Perth city skyline and the Swan River, making it a prime location for luxury waterfront apartments. South Perth’s median prices for luxury apartments are now around $1.2 million, with some high-end developments, particularly along Mill Point Road, going for as much as $3 million for larger, more luxurious units.
East Perth: Known for its proximity to the water and easy access to the CBD, East Perth is home to several newer developments that are attracting investors. The average price for a luxury apartment in this area is currently between $850,000 and $1.5 million, with some waterfront properties nearing $2 million.
Cottesloe and Claremont: While not traditionally considered high-rise areas, both suburbs are witnessing a shift toward more luxury apartment developments. Waterfront units can command prices well over $2 million, with some premium properties exceeding $5 million, driven by their beachside locations and proximity to Perth’s affluent western suburbs.
Strong long-term capital growth prospects
For property investors, the rise of luxury waterfront apartments presents both opportunities and challenges.
The obvious opportunity lies in the strong demand for these premium residences, driven by the lifestyle allure of waterfront living and Perth’s improving economic conditions.
Investors who acquire properties in well-located, high-demand suburbs such as Elizabeth Quay, South Perth, and East Perth stand to benefit from significant capital appreciation over the medium to long term.
Rental yields, however, are the detraction for this sector, especially for properties in premium locations. While not necessarily as high as the yields in more suburban markets, it is driven by demand from corporate tenants, international renters and long-term residents seeking the exclusivity of riverside living. This pool of tenants remains limited and consequently so do yields.
There are several risks to be mindful of as a buyer.
The construction boom in Perth’s luxury apartment sector means investors need to consider the potential for oversupply. While demand for luxury apartments remains steady for now, an influx of new stock over the next few years may lead to increased competition, slowing down capital growth and making it harder to secure tenants at premium rents.
Potential oversupply in 2025
The construction pipeline in Perth’s luxury apartment market is robust.
With numerous projects already underway and more planned for the coming years, it’s estimated that more than 10,000 new apartment units will be delivered in the next 18 to 24 months.
Developments in Elizabeth Quay, South Perth and East Perth will account for a significant portion of this supply.
While this growth is indicative of a thriving real estate market, it also raises the question of whether the city will see an oversupply of luxury apartments by 2025.
There are concerns that if the demand from affluent buyers and renters slows or global economic factors dampen investor sentiment, the market could become saturated.
As Perth is still experiencing a post-pandemic economic recovery, the trajectory of population growth and overall economic activity will be critical in determining the success of these developments.
If population growth continues to surge, particularly in the high-income bracket, the market may absorb the new supply without significant issues. However, should these growth projections fall short, the risk of oversupply increases.
Prime property caution urged
The rise of luxury apartments in Perth’s waterfront markets is undoubtedly reshaping the city’s real estate landscape, offering lucrative opportunities for investors and in particular developers who enter early or in high-demand areas.
As we approach 2025, the risks associated with oversupply cannot be ignored. Investors should be strategic, focusing on prime locations with proven demand, views that cannot be built out and will continue to support premium pricing, while remaining cautious of the growing construction pipeline and the potential for softer market conditions.
Keeping a close eye on market trends, development pipelines, tenant demand, and economic indicators will be key in ensuring long-term success in this sector.
