Aussie suburbs with ‘too much’ housing create dilemma for buyers

Rapid development has produced city pockets with an oversupply of homes, spurring an unusual opportunity and risk for home seekers.

They have too many houses and not enough buyers who want them.

Parts of Australia’s major capitals and urban centres have become oversupplied with housing to the point that property values are likely to fall or stay in the deep freeze for many years, new data shows.

These pockets of oversupply have come at a time when developers and urban planners have been scrambling to address widespread housing shortages across Australia as a whole.

But these efforts have tended to be concentrated in only a handful of capital city areas with plentiful Greenfield sites or established suburbs where the zoning supports higher density apartment projects.

Up to one in seven of the total housing stock in some areas is now up for sale. Picture: Brook Mitchell

And that means many of these areas have reached a threshold where supply far exceeds demand, with research from SuburbData revealing up to one in seven of the total homes in some suburbs are now up for sale.

> Sydney suburbs oversupplied with housing

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> SA’s oversupplied buyer’s markets

The suburbs with the biggest oversupply tended to be in Melbourne, Sydney and Brisbane, but there were also isolated areas with oversupply in smaller cities, SuburbData noted.

Experts have revealed the oversupply – where the volume of property sales far exceeds demand – has created a rare dilemma for home seekers.

On the one hand, these areas are now the country’s biggest buyer’s markets where new purchasers will face an easier entry path into the market because of the lower competition.

This opportunity comes with a catch: those softer conditions also make these markets some of the riskiest to buy into because of the higher likelihood of prices falling after purchase.

A unit in this building in Rouse Hill, one of Sydney’s most oversupplied suburbs, recently sold for $81,000 less than 2015 price.

SuburbData analyst Jeremy Sheppard said this risk made oversupplied suburbs suitable only for a particular type of buyer and they needed to be prepared to stay for the long-term.

“These can be great markets to buy into if all you care about is getting a roof over your head,” he said, adding that the lower competition meant they were easier to buy into.

“As far as equity is concerned they can be more dangerous than mining towns,” Mr Sheppard said.

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“The issue for a homeowner in these areas is that there will often still be lots of land nearby that can be developed and likely will be developed, so these markets can be hard to justify as an investment.”

Buyer’s agent Lloyd Edge of Aus Property Professionals said oversupply was of more concern for investors.

“If you are buying as an investment in an area where there are so many houses being built at the same time, it means there is no scarcity,” he said.

Host of former TV show Location Location Location Veronica Morgan said oversupply was a risk for new buyers.

“That is going to put downward pressure on prices when you go to sell the property because there is so much choice for buyers.

“It’s the same when you to rent it. You risk ending up with the property sitting vacant for a much longer time.”

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Buyer’s agent Veronica Morgan, who runs an academy for first-home buyers, said those hoping to get a “good deal” needed to be wary of purchasing in an oversupplied market.

“Generally, if something is easy to buy, it’s difficult to sell. If you’re a first-home buyer and this is not going to be your forever home think carefully about who the next person that you’ll sell to will be.”

Demand exceeds supply in much of the rest of the market. Picture: Tim Hunter.

PropTrack director of economic research Cameron Kusher told News Corp prior to the release of oversupplied data that most of Australia’s major capitals had housing shortages in general terms.

He said that shortage was often for “medium density” in established areas.

Mr Kusher noted that developers in some high-rise precincts had built too many of one-particular housing type – for example, studio apartments.

These were often aimed at investors but changes in interest rates meant fewer new investors were willing to buy these properties in the current climate.