Apartment values tipped to weaken in parts of Sydney, Melbourne

Several regions in two cities are now likely to underperform after an oversupply of new apartments, an agent has warned.

The Brisbane skyline at sunset. Picture: AAP

Even as a boom in apartment building starts to slow, some suburbs in Sydney and Melbourne that have seen a wave of new supply could now face softening unit values, one buyer’s agency has warned.

But the troubled Brisbane unit market is largely back in balance now as the number of apartment approvals has halved in two years, according to research from buyer’s agency Propertyology.

The research comes amid a broader weakening in the housing market, where national values have been falling for a year amid a regulatory crackdown on lending. Scrutiny from the financial services royal commission is tipped to further tighten lending standards.

Propertyology head of research Simon Pressley warned several regions in the two largest cities are now likely to underperform after an oversupply of new apartments, even as the national volume of new dwellings approved is easing back from high levels.

In Sydney, he warned on Rockdale, Sutherland, Canterbury, Liverpool, Ryde, Hornsby, The Hills, Blacktown, Parramatta, Botany Bay, Leichhardt, Marrickville and Camden.

In Melbourne, he highlighted the CBD, Boroondara, Yarra, Glen Eira, Whitehorse, Casey, Cardinia, Maribyrnong, Darebin, Moreland and Hume.

But he said Brisbane has come back into balance, with about 7700 apartment approvals over the last financial year — roughly half of the 15,800 approved two years earlier.

And Perth dwelling approvals started falling in financial 2015 so its housing supply is back to normal levels, although population growth has slowed since the end of the mining boom, he said.

In Hobart, dwelling approvals are rising but fall short of demand, while in Canberra demand for new housing remains strong, he said.

Signs were emerging of a possible oversupply of housing in the next few years in some regional centres including Geelong, the Gold Coast, the Sunshine Coast, Gosford, Wollongong and Ipswich, he said.

The research comes after a weak set of auction results this weekend, with a preliminary clearance rate of 49.8 per cent in the capital cities.

Results below 50 per cent are considered “buyers’ market” territory and the figure was well down on the 65 per cent of homes sold this time a year ago, according to property researcher CoreLogic.

Some observers have recently lowered their outlook, with AMP Capital chief economist Shane Oliver last week revising his forecasts for Sydney and Melbourne prices to a 20 per cent peak-to-trough fall.

Investment bank Morgan Stanley expects prices to fall by up to 15 per cent, with home lending approvals tipped to reach a seven and a half year low.

Veteran real estate agent John McGrath told The Australian last week he expects double-digit falls in the two major capitals peak to trough, saying these markets will be in for a tough year not unlike the period following the global financial crisis.