Apartment owners in Australia could be the big losers in 2016, with one major bank predicting a nationwide fall in value over 2016.
The latest edition of NAB’s Quarterly Australian Residential Property Survey, which for the first time includes forecasts for the unit sector, has predicted that unit prices will decline by 1.2% over the coming year.
Across the capital cities, the unit market in Melbourne and Perth
are predicted to be the worst hit, with prices expected to head backwards by 3%.
Brisbane and Sydney are expected to see price falls of 0.6%, while Hobart’s market will see no movement.
is the only city expected to see growth it its unit sector, with a 0.2% increase predicted.
NAB group chief economist Alan Oster said most residential markets in Australia have seen their best performance for the time being, with the unit market to suffer due to oversupply, its dependence on foreign purchasers and changes to investment lending policies.
“Weakening fundamentals have already seen the market starting to cool, suggesting the best of the price gains are probably behind us,” Oster said.
“Aside from the strong supply response in the apartment sector, a greater reliance on foreign buyers adds a degree of unpredictability to the outlook, both positive and negative” he said.
Todd Hunter, founder of buyer’s agency wHeregroup, said he thought NAB’s prediction may be a little conservative and said that oversupply is a huge issue for most unit markets across Australia.
“I think the decline for units could be considerably larger than that,” Hunter said.
“Just about every capital city is already way oversupplied and there’s a tonne more coming as well,” he said.
Hunter, who has never been a proponent of units as an investment location, said he would not advise people to buy one currently.
“I’ve never been a real fan of units because of strata fees and sinking funds and all those sorts of things and right now I definitely wouldn’t be looking to buy one.
“One of the problems is just how fast they’re getting put up these days. You can buy in an area and before you know it there’s hundreds more popping up.
“Look at what’s happened in Sydney, there would have been some areas where there was a good balance of stock, but you can only see what DAs are actually approved. You don’t know if a developer’s just going to come in and put another huge block right next to you.”
While NAB is predicting unit values to head into negative territory, there will be an increase, albeit small, for house prices.
Nationwide, NAB predicts house prices will rise 1% through 2016.
Brisbane is expected to lead the way, with capital growth of 3%, with Melbourne in second place at 2%.
Prices will rise 0.6% in Sydney and 0.2% in Adelaide.
Perth will be hit by 3% decrease, while prices in Hobart will decline 0.6%.
While he disagreed with their prediction for units, Hunter said NAB's housing forecast was similar to his outlook for the year.
“Nationally I think that’s probably right. I think we’ll see a decline in Sydney and a little one in Melbourne. Perth and Darwin
will fall too, while Adelaide might see a little growth.
“Hobart will be fairly flat, while Canberra and Brisbane look like they’re going to be pretty strong, so that 1% sounds about right.”
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