Apartment prices in inner-city Sydney fell by up to 19% in the final quarter of 2015, a report by real estate group JLL has discovered, drawing parallels with the similarly inauspicious apartment market in Melbourne’s CBD.
JLL’s report found that suburbs within 10 kilometres of the Sydney CBD, including Rosebery, Potts Point and the CBD itself, suffered significant price falls in the second half of 2015.
Such a fall in prices can be regarded as proof of an excess of apartment supply in relation to demand. Prices for new and re-sold apartments in Rosebery in particular fell by up to 19%, with the CBD falling by 12% and Potts Point by 9%.
Sydney’s inner south is particularly vulnerable to oversupply in the wake of the $13 billion Green Square town centre, where 45,800 new units could be built by 2020, potentially leading to further oversupply.
In addition, a slowing down in the sale of off-the-plan apartments is another sign of oversupply, with merely 50% of off-the-plan projects marketed in 2015 sold within a month – significantly down on the 87.7% of 2014.
However, Jeremy Fisher of Sydney-based 1st
Street Home Loans is not fazed by the gloomy outlook, so long as brokers remain cautious.
He told Australian Broker
, “Any negative media is bound to scare Sydney buyers, especially if they are considering off-the-plan purchases. We have always taken a cautious approach with any clients purchasing off-the-plan, to ensure they were aware of the potential risks of such a purchase, which is predominantly a shortfall in the valuation or potential lender policy changes at the time of formal approval.
“As an additional safeguard, we ensure our clients are financially capable of covering any shortfall up to 20% of the purchase price, which up till now has not been required.
“I am not expecting a significant downturn in enquiry for off-the-plan purchases. The only change could be the value of the property.”
Alarm bells similarly went off in Melbourne in March when sales data showed that some apartments in the CBD are being sold off at up to 30% less than their off-the-plan purchase price.