A new wave of supply is hitting the Brisbane high-rise apartment market, which has had a softening effect on prices.

Two weeks ago, Reserve Bank Governor Philip Lowe said that Brisbane’s building boom was coming under closer scrutiny.

“We are … watching the Brisbane property market carefully, particularly the effect on prices of the large increase in the supply of new apartments,” he said during a dinner.

Sales of off-the-plan apartments in the Queensland capital have dropped from a peak of more than 1,600 in the December quarter of 2014 to around 300 in the June quarter of this year.

Tim Lawless, head of research at CoreLogic, called the inner-city Brisbane apartment market “quite problematic” given the current oversupply, and placed Perth and Melbourne in the same category.

“Encouragingly, we have seen a peak in the construction pipeline for all those cities which suggests to me that we probably are getting close to the worst of the market conditions in those areas, but we still expect there to be some settlement risk,” Lawless said.

Over the March quarter, 25% of the apartments that were resold in Brisbane changed hands at a loss, a proportion that Lawless believes will rise.

Meanwhile, Brisbane unit values fell by 3.2% over the year to the end of August, according to CoreLogic.

“With supply levels being as high as they are in Brisbane, that’s affecting valuations but it’s also ­affecting confidence,” Lawless said. “Buyers should be relatively cautious around inner Brisbane.”

Lachlan Walker, director of Place Advisory, said the Brisbane apartment market has “softened considerably” over the past year, though it has stabilised over the most recent quarter.

A regulatory clampdown on investment lending designed primarily to cool the heated Sydney property market has “put the handbrake on the Brisbane marketplace,” Walker said.

Walker forecasts a 12-month period when the city will be flooded with an oversupply before the cycle restarts and the city goes back into undersupply.

Rental yields are likely to edge slightly lower but remain more attractive than in other states, and while Walker anticipates a slight softening in prices, he doesn’t think there will be significant changes in the prices of apartments overall.

Average prices for new apartments in Brisbane have begun to rise this year due to evolving stock and developers going after more upmarket clientele, like wealthy downsizers and owner-occupiers.

The weighted average sale price passed $725,000 in the June quarter, up from about $578,000 last year, according to Urbis. Moreover, the number of projects launched per quarter has slumped from 25 in the second quarter of 2016 to five a year later.

“What we have seen over the past six to nine months is the projects that have gone to the market have been slightly more focused on an owner-occupier,” said Paul Riga, director of Urbis. “It’s not necessarily being driven by the number of sales that are being made; it’s more around the product that’s being sold.”

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