A $400 million 43-storey twin-tower development proposed for Perth's iconic Scarborough Beach has been knocked back by the body tasked with overseeing urban development of the city.

The hotel and entertainment precinct development was set to include a convention centre, hotel, apartments, shops and eateries on the corner of West Coast Highway and Scarborough Beach Road.

A statement from the Metropolitan Redevelopment Authority said the application, put forward by Chinese-owned developer 3 Oceans, had been refused planning approval because it was a significant overdevelopment of the site.

The development would have included Perth's first beachside convention centre. ( Supplied: Hillam Architects )

The plan included two towers — one of 43 storeys and another of 35 storeys — which is nearly four-times the base height maximum of 12 storeys under the MRA's Scarborough Planning Framework.

This framework allows developers to apply for an additional six storeys on buildings — taking the limit to 18 storeys in total — if the proposed development provides significant community benefits, such as:

Exceeding baseline development policies

Exceeding baseline development policies Provision of short-stay accommodation

Provision of short-stay accommodation Exceeding minimum sustainability requirements

Exceeding minimum sustainability requirements Outstanding architectural design as agreed with the MRA

Outstanding architectural design as agreed with the MRA Improves public connectivity through east-west links

Improves public connectivity through east-west links Other significant community benefits as agreed with the MRA

The Rendezvous Hotel — the tallest building in Scarborough at 18 storeys — was granted such an exception when it was built under its original name: Observation City.

"The benefits proposed did not warrant the extent of discretion sought from the MRA," the statement said.

"Given the site's location on the corner of West Coast Highway and Scarborough Beach Road, the board determined that the critical mass of residents, workers and visitors on one site would also have serious impacts on the local traffic network."

Traffic concerns were highlighted in the lead up to the decision.

Despite an 11th-hour agreement with Main Roads WA and the developer for construction of a pedestrian bridge over West Coast Highway, the MRA said this was not included as part of the assessment.

'Missed opportunity' for WA

The 3 Oceans proposal: $400 million development

$400 million development 159 hotel rooms

159 hotel rooms 300 residential apartments

300 residential apartments 328 public car bays

328 public car bays Beachside convention centre

Beachside convention centre 2 swimming pools

2 swimming pools 4000sqm of public space

4000sqm of public space Hotel to have three-level "sky gallery" overlooking the ocean, with local art

Hotel to have three-level "sky gallery" overlooking the ocean, with local art Developer estimated 2,000 local jobs for construction, 400 jobs created long term

3 Oceans managing director Dyno Zhang declined to answer questions from the media, but read a short statement decrying the decision, saying the firm was "surprised and disappointed".

"The MRA board has missed an opportunity to show courage and vision and support our project, which will be a game changer for the local Scarborough community," Mr Zhang said.

"The decision to refuse development approval for the iconic Scarborough project is contrary to State Government and City of Stirling's commitment to redevelop the Scarborough Beach foreshore."

Mr Zhang declined to answer questions from the media. ( ABC News: Chloe Hobson )

He said it failed to align with government objectives of creating jobs and tourism opportunities.

"It sends the wrong signal for people wanting to invest in Western Australia, particularly in the local Scarborough area," Mr Zhang said.

"3 Oceans property group will now work with the State Government on finding a way for the project to proceed."

The project is associated with Chinese steel tycoon Ma Xibo, whose Hebei Qianjin steel group is the majority owner of 3 Oceans Property.

It also had backing from a Singapore-based investment group, Hong Rong.

Mr Ma has other interests in the State, swooping on the failed Palandri Wine Group in 2008 and re-branding the firm to 3 Oceans.

Planning Minister Rita Saffioti said the State Government was disappointed the issues with the development could not be resolved prior to the MRA Board's decision yesterday.

"We are keen to see significant development occur at the site and still hope to work with the applicant towards an agreeable proposal," she said.

This was the final meeting of the MRA Board, as the State Government moves to make major reforms to WA's land agencies, creating one central planning body out of the MRA and LandCorp.

Tourism Council chief executive Evan Hall said the rejection of this development would come at a great cost to tourism and jobs in WA.

"It means there is a lot of jobs forgone that we really do need in the economy at the moment and excellent facilities not only for West Australians but for our visitors around the world."

The MRA said it would welcome the opportunity to work with the developer on a modified proposal that was "more consistent with the vision of the Scarborough Master Plan".