Apartment price fall an opportunity for first-home buyers

Millennial investors who have been “locked out” of the residential market may finally get a break.

Millennial investors who have been “locked out” of the residential market may finally get a break.

A blitz of new reports from local and global financial institutions — including most recently Morgan Stanley — are now offering clear warnings that apartment prices will fall across the country.

Morgan Stanley has explicitly warned of so called “settlement risk” on more than 100,000 apartments across Australia by the end of next year.

The New York investment bank’s forecast scenarios assume a hard landing for the apartment construction market that will also lift unemployment and force the RBA to recommence cutting rates.

For employed Millennials the combination of lower rates, softer prices — especially discounting in the apartment sector — offers an improved chance to buy a first home, but it will almost certainly have to an apartment.

The escalation of warnings on CBD apartment blocks and the prospect that softer prices in the unit market will spread wider across the economy has already hit the stock exchange.

Listed developer Lend Lease lost 5 per cent in a single afternoon session earlier this week as the builder warned of a slowdown in activity.

First-home buyers will be watching the vacancy rate in residential markets as a key indicator of bargains in the wider property market — at present vacancy rates are about 1.7 per cent in Sydney and 2 per cent in Melbourne and 2.9 per cent in Brisbane.

But these rates have already hit 5 per cent in Perth, the first major city to be hit by a much anticipated cooling in the housing market.

The last time Australia faced a full-blown price collapse in the property market — the commercial property crash of the early 1990s vacancy rates went from 2 per cent to higher than 10 per cent — the most pessimistic forecast at the time were that vacancy rates would blow out to 7 per cent.