Increased development activity in regional towns could signal weaker growth in those markets, a leading property expert has warned.
Terry Ryder, founder of Hotspotting.com.au, urged investors to be aware that strong regional markets can become victims of their own success if they are targeted by developers.
“Sometimes in regional towns, the growth is too strong so developers pile in and build too much new stock,” he said.
“They end up oversupplying the market.”
He said Gladstone in Queensland was an example of this phenomenon.
In December 2012, the median 12-month growth rate for houses in Gladstone City was 29 per cent.
By December 2013, this growth rate was in the negatives, coming in at -39 per cent.
Mr Ryder said neighbouring Mackay was another market that had been flooded by new builds.
On the flipside, he said Dubbo was a town with steady growth that had avoided oversupply.
“The development industry hasn't built massive amounts of new stock,” he said.
He urged investors to keep an eye on vacancy rates and increased signs of development activity.
“That's when it gets a little bit dangerous for investors because developers could quickly create an oversupply that can undercut the whole market,” he said.
“That's the only warning signal for people to keep in mind and that applies to any city you're thinking of investing in.”