Luxury apartments sell on 'pent-up demand' not tax breaks

Financial Review

19th November 2019.

Buyer interest in new 37-storey South Perth tower development unaffected by stamp duty savings of tens of thousands of dollars, says developer Sirona.

Pent-up demand – not off-the-plan tax breaks – will sell 99 luxury apartments in a newly approved South Perth tower, according to the developer.

Sirona Capital's Matthew McNeilly said a lack of new apartments in the pipeline had created strong market conditions in parts of Western Australia.

The 37-storey Lyall Residences tower won planning approval from the Metro Central Joint Planning Assessment Panel on Monday but Mr McNeilly said he still would have preferred to have been selling the much-delayed project earlier.

He added that while buyers would benefit from the new policies, which cut the duty payable on the off-the-plan purchase of an $800,000 dwelling from $32,316 to $8079, it would do nothing to affect the existing overhang of apartments on the market.

"I would have preferred to be selling these things 18 months ago," Mr McNeilly said. "It is what it is."

Many, including Mr McNeilly, have welcomed the changes outlined by Treasurer Ben Wyatt to slash 75 per cent off the duty paid by purchasers of off-the-plan dwellings and kickstart new developments.

Treasurer Mr Wyatt last month told The Australian Financial Review the same developers who had existing stock had also lobbied for the reduction.

"They might have some anxiety, but they’re also encouraged by the fact that they can now get on and develop other blocks that they may have."

In the case of Sirona's $65 million luxury apartment offering, the lack of projects in the area meant there was a pent-up demand that ensured new homes would sell, irrespective of stamp duty concessions, Mr McNeilly said.

Planning delays, rather than the depressed market, had prevented his company taking the Bates Smart-designed project – cut from an original 44 storeys and 120 units – to market earlier, he said.

"We’ve had a couple of false starts," Mr McNeilly said.

"We tried to get an approval late last year. There were all sorts of issues around the South Perth town planning scheme, particularly in relation to the discretion to grant height."

Mr McNeilly declined to say what price the apartments in the tower across the road from Perth Zoo would be sold at. A builder will only be appointed in the second half of next year.

The $65 million project is a joint venture between Sirona and Singapore's Chip Eng Seng Corporation. Under the revised design plan that won approval, the number of car parks has also been cut to 194 from 215.

“We’ve also reduced the number of apartments to facilitate an intimate community of residents living in one, two, three- or four-bedroom sky homes – with almost all levels having only four apartments per floor," Mr McNeilly said.

"Bigger complexes can feel less personal, and that’s what we want to avoid, especially in a tight knit community like South Perth."