The Reserve Bank of Australia (RBA) has issued further warnings around the possible dangers apartment oversupply poses to multiple property markets across the country.
In their Statement on Monetary Policy following last week’s board meeting that ended with the official cash rate hitting 1.5%, the central bank predicted housing investment is expected to remain strong; however it does hold concerns for some sectors.
“Dwelling investment has continued to grow strongly. While building approvals have declined over the past year, they remain elevated and the pipeline of dwelling construction is at very high levels,” the statement said.
“This is expected to support dwelling investment for some time, but also raises the risk of oversupply in some markets.”
Inner city Melbourne and Brisbane are specifically identified as markets of concern, with the RBA nervous that off-the-plan buyers will be left without the necessary fiancé to settle their purchases.
“There are some concerns about the concentration of new supply in areas such as some parts of inner city Melbourne and Brisbane,” the RBA said.
“Downward pressure on prices from large increases in supply relative to demand for apartments in some areas could increase the risk of off-the-plan purchases failing to settle.”
Brisbane already appears to be experiencing some of the impacts from oversupply, with its inner city apartment vacancy rate sitting at 3.7% across the June quarter
With a large amount of stock still in the pipeline, the RBA also warned that the issues could be exacerbated if population growth begins to falter.
“The number of newly approved dwellings has been above completions for some time, leading to a build-up in the pipeline of work yet to be done to historically high levels.
“This build-up in dwellings under construction or yet to be commenced is particularly apparent in New South Wales and Victoria.
“In New South Wales and Victoria, relatively strong population growth has supported underlying demand over the past few years. However, in Western Australia and to a lesser extent Queensland and South Australia, population growth has slowed following the end of the mining investment boom.”
Outside of the off-the-plan market, the RBA believes conditions across Australia’s housing market are generally cooling.
“Conditions in the established housing market appear to have eased since last year. While one source of data recorded strong growth in housing prices in April and May, that growth appears to have been overstated and other sources suggest that housing price growth was modest over those and more recent months.
“Moreover, a range of other indicators are consistent with an easing in conditions. In particular, housing credit growth remains lower than a year ago, consistent with the tightening in lending standards towards the end of 2015 and the decline in turnover in the housing market to low levels this year.
“Also, the rental vacancy rate has drifted higher, to be close to its long-run average, and inflation in rents has eased to multi-decade lows.”
Can you afford to buy in this suburb? Find out how much you can borrow
Top Suburbs :
Get help financing your investment
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 expert 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, our mortgage broking service is at no cost to you.
We value your privacy and treat all your information seriously - you can check out