A recent survey of housing experts and economists has revealed that they believe three Australian capital cities will all face falls in property prices in their apartment markets due to oversupply. However, this is far from being the whole story as one Sydney suburb in particular continues to surge with no sign of slowing down. Let’s understand why all apartment markets are not created equal, and learn how to pick a winner.
For the past year or more I have been warning about the incoming apartment oversupply that will hit certain pockets of our biggest property markets and really hurt some unsuspecting mum and dad investors. I even went as far as writing a specific report on the issue (“Australia’s No Go Zones”) that I first released late in 2016 outlining the areas I thought investors needed to steer clear of. It seems now some other property commentators are finally catching on.
According to a panel of economists, price falls at “record levels” are supposedly on the cards for the apartment markets in three of our biggest cities. Out of 26 housing “experts” and economists questioned by website Finder, the majority of them believe that apartments in Melbourne and Brisbane are heading for oversupply status.
75 per cent of those questioned claimed there are already far too many apartments located in Melbourne. About 70 per cent of the panel thought Brisbane was also facing an apartment-based oversupply, while on the other hand less than half shared the opinion that too many apartments were being built in Sydney.
I want to be clear here in saying we are far from any kind of property Armageddon, and when it comes to Brisbane, Melbourne and Sydney there are only certain property types and suburbs that will be affected and suffer the related pitfalls of oversupply. One Sydney market in particular should continue to see substantial growth, which I’ll talk a little more about shortly.
But some markets will absolutely suffer, and I am already hearing from investors regularly telling me of the pain some of their ill-advised investments are bringing them as they are swept up in an unforeseen wave of oversupply. In my next round of live events I’ll be outlining where I think these areas are, how to spot the warning signs, and also reveal the “safer” postcodes that are offering investors great opportunities. To claim a seat for the next event near you click the tab below.
One of the members of the aforementioned panel was AMP Capital chief economist Shane Oliver, who believes there were clear signs of an oversupply in Brisbane as prices were “coming off the boil”. When it came to Sydney, however, this is what Mr Oliver had to say….
“It’s a struggle to say it’s a huge oversupply in Sydney, but it’s there in pockets … the lower north shore, Parramatta, Bankstown and around the inner city areas are the most affected by apartment development,” Dr Oliver said.
I agree that Sydney possesses pockets that are in for some pain, but it’s important to remember it also contains property markets that continue to storm onward and upward.
The Northern Beaches Suburb of Manly, including its apartment market, can thank an undersupply of stock for its rising price points. The median price for a 2 bedroom apartment in Manly (as of April 10th, 2017) was $1,223,000. This is a more than 25 per cent increase over the past few years.
These kinds of results are possible for all investors when desirable suburbs are able to control the supply of new stock coming on to the market. And to add further good news there are markets out there providing strong performance, rental yields in excess of 5 per cent with affordable price points. To learn more about how to find these properties, as well as where I am personally buying my next investment property click here to register for my next event near you.