Australians are being urged to avoid buying apartments in postcodes where the number of units is set to double and even triple within two years.
The Reserve Bank of Australia is expecting median house prices to surge by 30 per cent during the next three years as a result of record-low interest rates.
Prices for units however could fall in some suburbs where there is already an oversupply of apartments and rental vacancies have surged as a result of the Covid border closure.
In December, apartment values fell in Sydney for the eighth consecutive month, making it by far Australia’s worst market for units in 2020, CoreLogic data showed.
Australians are being urged to avoid buying apartments in postcodes where the number of units is set to double and even triple within two years. In December, Sydney’s median unit price fell for the eighth consecutive month to a still dear median of $733,852. Mascot pictured
This occurred as house prices last month rose in every state and territory capital, with new working-from-home arrangements diminishing demand for units near train stations.
Sydney’s median unit price of $733,852 is already much dearer than the median price of houses in Brisbane, Adelaide, Perth Darwin and Hobart and is almost as pricey as the mid-point price for a home with a backyard in Melbourne and Canberra.
For that price, it is also possible to buy a house near the beach on the New South Wales Mid-North Coast or the Gold Coast in Queensland – two regions where house prices reached record highs in 2020.
Amid predictions of climbing house prices, Metropole Property Strategists has revisited RiskWise Property Research data pinpointing the suburbs where the number of apartments is set to surge by the end of 2022 – in some cases almost doubling and tripling the stock of units.
Brett Warren, the Brisbane director of Metropole Property Strategists, said apartment buying in some areas was particularly risky now that investor landlords were no longer dominating the property market, despite the record-low interest rates.
‘At the same time, serviceability is still a major factor for investors who rely on a stable income to cover the costs associated with property and the mortgage for the property,’ he said.
Amid predictions of climbing house prices, Metropole Property Strategists has revisited RiskWise Property Research data. Rouse Hill in Sydney’s north-west was considered most at risk with the number of apartments set to triple, or rise by 200.4 per cent, from 833 to 2,494 as developers took advantage of rezoning around the new metro train station
RiskWise Property Research last year listed the suburbs where the number of units is, in some cases, set to almost double or even triple by the end of 2022.
Rouse Hill in Sydney’s north-west was considered most at risk with the number of apartments set to triple, or rise by 200.4 per cent, from 833 to 2,494 as developers took advantage of rezoning around the new metro train station.
Gosford on the Central Coast, north of Sydney, was also considered a risk with the number of apartments forecast to rise by 72.9 per cent from 2,554 to 4,413.
New developments in Darwin were expected to see the new of apartments surge by a third as a similar phenomenon caused unit stock at West End, in Brisbane’s inner south, to climb by a quarter.
Of the ten most at-risk postcodes, three were in Sydney, two were in Melbourne with Darwin, the Gold Coast, Brisbane, Adelaide and the New South Wales Central Coast making the list.
Gosford on the Central Coast, north of Sydney, was also considered a risk with the number of apartments forecast to rise by 72.9 per cent from 2,554 to 4,413
The recommendation to avoid buying apartments in these suburbs was based, not just on planning approvals for new units, but also a forecast of weak rental demand.
‘COVID-19 has also increased cash flow risk, as vacancy rates are at an all-time high,’ Mr Warren said.
In May, vacancy rates in Sydney’s city centre surged to a record 16.2 per cent but as of December it had settled at 7.8 per cent as businesses reopened, SQM Research data showed.
Mascot, near the airport, is expected to see a 13.3 per cent increase in new apartments within the next two years and this area of south-east Sydney is also home to a cracking apartment tower.
‘High-profile issues about defect issues in high-rise apartment blocks has caused enormous reputational damage for the entire industry and has seen many investors lose interest in high-rise developments,’ Mr Warren said.
The ten most at risk postcodes in next two years
Rouse Hill, Sydney north-west (2155): 1,661 new units proposed in area with 833 apartments, 200.4 per cent rise
Gosford, NSW Central Coast (2250): 1,859 new units in area with 2,554 apartments, 72.9 per cent rise
Darwin (0800): 1,204 new units in an area with 3,737 apartments, 32 per cent rise
West End, Brisbane (4101): 1,211 new units in an areas with 4,636 apartments, 26 per cent rise
Surfers Paradise, Gold Coast (4217): 2,779 new units in an area with 19,857 apartments, 14 per cent rise
Melbourne city centre (3000): 4,744 new units in an area with 34,694 apartments, 13.6 per cent rise
Parramatta, western Sydney (2150): 1,533 new units in area with 11,700 apartments, 13.2 per cent rise
Mascot, Sydney south-east (2020): 804 new units in an area with 6,023 apartments, 13.3 per cent rise
Adelaide city (5000): 1,206 new units in an area with 9,807 apartments, 12.9 per cent rise
Docklands, Melbourne city (3008): 1,307 new units in an area with 10,845 apartments, 12 per cent rise
Source: RiskWise Property Research