Oversupply of off-the-plan apartments could push prices down

By |
A new report by trends forecaster Hotspotting states that the number of apartments being sold off-the-plan in many major Aussie metropolitan areas—such as the Gold Coast, Sydney, Melbourne, and Brisbane—currently exceeds demand. This is dangerous for property investors because oversupply would force prices down.

Property analysts widely consider oversupply to be a red flag for off-the-plan buyers because it puts downward pressure on prices. This in turn increases the risk of homes being worth far less than what their owners paid for them once construction is complete.

Units in the Sydney suburb of Parramatta, compared to inner Sydney, posed an even greater risk to buyers because of already-falling sales volumes.

“Parramatta, in particular, is a concern,” Terry Ryder, director of Hotspotting, told news.com.au. “There is already a pattern of decline in sales but supply is still increasing. It’s a very dangerous combination.”

On the whole, Sydney’s oversupply concerns are more long-term, and would be restricted to areas like Green Square, the CBD fringe, and Parramatta.

According to Ryder, inner Melbourne posed the biggest danger for buyers. “New supply in Melbourne has gone way over the top but many buyers are unaware of this,” he said. “The danger is that the risks aren’t glaringly obvious. In other markets, buyers may have a better sense of what they’re getting into.”
 
Apartment buyers in inner Brisbane would face similar issues, and Ryder calls this area the country’s second most significant “no-go area”.

Foreign buyers won’t absorb the glut

Across capitals, developers have sought to remedy the supply imbalances by targeting foreign buyers, especially those from mainland China, in the hope that they would absorb the excess housing stock.

Ryder says this strategy won’t work because Aussie and Asian banks have clamped down on foreign lending.

Angie Zigomanis, analyst at BIS Shrapnel, agreed that foreign buying was on the decline, leading to softer demand overall. He noted that foreign demand was at its peak 18 months ago, but has since been on the decline.  

While the glut of inner city apartments throughout the country was worrisome, it was felt to a different degree in each capital. Inner Sydney is the only major CBD market where rising supply would not push down prices in the immediate future, Zigomanis said.


Related stories:
Sydney Falling Out Of Favour With Investors
Can Real Estate Agents Who Sell Strata Developments Manage Strata Schemes?

 

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Top Suburbs : freshwater , campsie , penrith , woolloongabba , nightcliff

go back

Get help with your investment property



Do you need help finding the right loan for your investment?


When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here