Experts have expressed fresh concerns for investors, as off-the-plan projects threaten to flood the market and drag prices down.
Suburbs in Western Sydney, such as Campbelltown and Liverpool, are at particular risk, according to Sydney-based buyer’s agent Nick Viner.
“Depending on what the area is, certainly out west and south-west, there is definitely a chance of there being an oversupply of properties when they come onto the market,” he said.
There are two main factors that will contribute to an oversupply situation, and subsequent price decline, according to Mr Viner.
“Number one; because a lot of those buyers are overseas buyers, what will they actually do with the properties when it comes time to settle? Number two; if there is a risk of oversupply, are the banks going to be able to value the properties at the purchase price when that apartment conceivably could have been bought at the peak of the market? If not, then you could have a lot of people in a pretty desperate situation trying to offload all these properties.”
Mr Viner’s comments come after AMP chief economist Shane Oliver warned that Australian property is overvalued, and that off-the-plan residential property in western Sydney and inner-Melbourne is at particular risk.
Mr Oliver told Smart Property Investment’s sister publication SMSF Adviser that with recent changes to investor lending practices by a number of the banks, some off-the-plan investors could have difficulty getting finance further down the track.
“There could be a period of short-term indigestion, and some of the recent surge in unit construction or apartment construction coming into the market could be a dampener on prices in some areas,” he said.
“Australia still has a shortage of property but there will be certain suburbs in certain areas in Sydney and Melbourne where we’re going to have a potential oversupply. For example, in the inner-city parts of Melbourne and also the Western suburbs of Sydney, the supply of units is starting to have a dampening impact on prices.”
Mr Oliver also warned self-managed super funds against investing too heavily in Australian residential property.
“For the last 10 or 15 years, we've been battling excessively expensive home prices, poorer housing affordability and excessive growth in household debt,” Mr Oliver said.
"Australians are loaded to the gunwales with property; about 50 per cent of household wealth is invested in residential property,” he said, adding: “You can make a case for commercial property, but residential property is over-valued and over-owned by Australians.”