Perth is building apartment blocks at the lowest rate in the country despite suffering a major housing supply crisis and extreme increases in the cost of land, a comprehensive national report shows.
The city has one of the greatest gaps between population increase and new housing supply, forcing more people to share the same dwelling, according to the State of Australian Cities 2012 report.
About 98,500 new dwellings were built in Perth during 2006-11 to accommodate the 284,000 additional residents - a rate of 2.9 people per new dwelling, the third highest of 18 cities.
Perth is on average building new homes faster than any other Australian city, but the new stock continues to be mostly detached houses, reducing its impact on the shortage.
The percentage of new properties that are multi-residential dwellings, such as apartments and townhouses, has shrunk to less than 20 per cent, the lowest level of all capital cities.
It has significantly fallen in the past three years from 30 per cent and from as high as 40 per cent in 1989.
In contrast, major cities have overall seen a shift towards attached dwellings since 1996.
The report warns that without a significant rise in multi-residential dwellings growing demand could not be met – causing greater housing shortages.
Nationally, the gap between housing supply and population increase has become the worst Australia has experienced in a century, according to the report.
"... this is the only significant period of undersupply relative to population growth that has occurred outside the Depressions or World Wars since at least 1860," the report says.
Perth's population is growing at more than 2 per cent each year – the fastest in the country - and is forecast to double to 3.4 million by 2056, according to the Australian Bureau of Statistics.
The percentage of West Australians living in the capital city is higher than any other state.
The increasing demand for inner-city living also has seen the price of housing closer to the CBD escalate to more than $900,000.
While the decline in prices according to the distance from the CBD was once gradual and consistent, it is now far more dramatic for the first 20 kilometres.
Perth continues to build some of the largest houses in the world but that is slowly declining.
While lot sizes have been decreasing in the past decade, Perth is running out of quality land to build on, forcing prices to sharply rise and become by far the most expensive land of all Australian capital cities.
In less than 10 years, the cost of land in Perth has soared from about $160 per square metre to a whopping $575 per square metre.
Urban Development Institute of Australia WA chief executive Debra Goostrey said land costs now accounted for two-thirds of the total house and land package, compared to one-third not long ago.
The majority of those costs came from extra costs in preparing the soil and greater demands from local governments to provide associated infrastructure, from basics such as electricity to community services including libraries and halls.
"Some of the big growth councils are not geared up for urban development when it hits them, so they haven't got the infrastructure and they haven't got any way of raising enough money through their local rates system," Ms Goostrey said.
"They're saying to the developer, 'you're bringing more people in, now you have to pay for this'."