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

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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?


Top Suburbs : collingwood , westbrook , wentworthville , willliamstown , redcliffe


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