With the rising unaffordability of single detached houses, Aussies are now flocking to apartments, which are cheaper and closer to the capital. And according to CoreLogic RP Data, apartments are being built in Australia at a record-breaking pace, with an estimated 231,129 new apartments to be completed over the next 24 months.
The inner city regions of Melbourne, Brisbane, and Sydney recorded the highest number of apartment constructions, which are unsurprising considering that they are also Australia’s most populous cities. However, this has raised concerns over the potential for a looming housing glut, further aggravated by tighter restrictions on investor and overseas buyers from Australian banks.
“Mortgage lenders have recently tightened their lending criteria. Subsequently, some people who have committed to off-the-plan units may not be able to borrow as much as they could at the time of signing the contract,” said Cameron Kusher, a research analyst at CoreLogic RP Data.
“To compound the situation, three of the four largest banks have announced they will no longer be lending to overseas home buyers which may result in a larger number of contracts not progressing through to settlement, considering a larger proportion of off-the-plan unit sales are to overseas buyers,” he added.
Hence, there is a risk that some properties may be worth less than the price they were purchased for off-the-plan. In fact, some apartments in central Melbourne are selling at discounts of up to 30 per cent. This follows the Reserve Bank’s warning last year that the high-rise construction boom “could lead to an excessive increase in construction activity and future supply overhang,” particularly in the inner city areas of Brisbane and Melbourne.
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