South West WA

The Smartline Report – August Edition

The month in review: South West WA

By Herron Todd White
August 2015

Throughout the upward swing of last year developers released considerable amounts of new land particularly throughout the cities of Busselton and Bunbury and the Shire of Augusta Margaret River being estates in Yalyalup, West Busselton, Vasse, Dalyellup, Eaton, Australind and Margaret River. That coupled with favourable market conditions fuelled construction growth. Now as 2015 progresses the building industry is starting to slow down as demand starts to reduce.

Current building contracts for these estates typically range from $200,000 to $300,000 which provides for a single level brick 4-bedroom, 2-bathroom residence of a standard project design. These homes in this current market equate to a range of $900 to $1,100 per square metre of living area which overall has strengthened slightly over the past five years.

Historically speaking (over the past five years) building costs were higher throughout 2010 and 2011 but then diminished considerably throughout 2012 as market conditions were very weak and competition between builders was very high as they competed for the limited amount of prospective purchasers. However, the upward swing through 2013 and 2014 pushed building contract prices back up again as the backlog of demand was serviced. 2015 has now brought about stabilised conditions and building contact prices seem to have levelled.

Unfortunately, the prestige market is considerably slower than the lower and middle market segments. Architect designed two level homes throughout prestigious localities in the south west such as Eagle Bay, Bunker Bay, Old Dunsborough and the coastal strip of Geographe Bay are being built at a range of $2,000 to $4,000 per square metres of living area. These homes can range anywhere between $1 million to $5 million on completion depending on location and size of the lot. Despite a small increase in activity throughout 2013 and 2014 this market has remained slow over the past five years. Market values had reduced and have now levelled and building costs in this market segment have followed suit.

Overall the new home construction industry has stabilised.


For a town of this size, Esperance appears overserviced in the building space with a mix of project home through to prestige builders. There is a bottom line here as every component of a construction has to be freighted in usually from 750 kilometres away with freight costs being a notable part of the overall construction cost. Construction costs for the typical 4-bedroom, 2-bathroom project home have reduced over the preceding three years from a high in the boom of approximately $1,500 per square metre to a current level in the vicinity of $1,200 per square metre apportioned over the living area. This provides a completed home with floor coverings and window treatments, a reasonable standard of fixtures and fittings, painting throughout, paving, fencing and landscaping. The good news for those building now is the market is still paying the higher amount for established properties, less any accumulated depreciation. Essentially, those who built at the peak will not have seen any added value to their properties from building, notwithstanding the advertising that suggest people are automatically in front if they choose to build over purchasing an established property.

Higher quality construction costs range between $1,800 and $2,000 per square metre depending on the final finish. Typically such construction will be solar passive with polished concrete floors, high quality fixtures and fittings as well as inbuilt furnishings. Limited properties come on the market with this standard of finish as most clients are constructing with longer term occupancy goals hence overcapitalisation is not usually of concern. That said, the small number of such sales has indicated the market is prepared to pay for quality and supports the construction costs however again those building in this market will be unlikely to see any capital growth from their investment.

Unit development costs are not dissimilar in their trends. Very few such developments occur in this town however two separate 1-bedroom developments with standard finishes have been constructed for prices ranging between $2,400 and $2,800 per square metre, with the variation largely attributable to the extent of further site finish. A prestige unit development of recent construction saw development costs in the vicinity of $4,000 per square metre which included high quality site finishing as well as superior living quality in comparison to that prevailing for this locality.

Current building activity here is best described as consistent. New housing volume has decreased since the peaks of three to five years ago however it has not crashed and builders have still got a sufficient number of jobs on their books to keep themselves and the tradespeople relying on their work employed at a steady pace.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2015. Australian Credit Licence Number 385325


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