This confirms what many have feared for some time: a good share of unit owners are selling at a loss, with oversupply issues taking hold in certain areas of the market.
We’re already seeing the effect that the high level of unit construction is having in Melbourne and Brisbane. Units rather than houses are driving the biggest losses, a scenario explained by this big surge in unit construction.
Looking forward, I think we’ll continue to see this trend grow – though not necessarily in Sydney. In cities like Sydney, where our demographics are changing and single-person households are becoming more prevalent, we’re seeing a relatively stronger performance in the unit market.
Geographically, unit supply is coming in around the city – if you look at the areas where there’s a lot of supply, it’s the inner city, Parramatta and Sydney Olympic Park.
Also, Sydney’s been approving more units for construction than houses for the last two decades, and people are a lot more accustomed to living in units – this is likely why their performance is holding up much better than in some of the other capital cities, where unit living is a more recent trend.
Also, Sydney’s been approving more units for construction than houses for the last two decades, and people are a lot more accustomed to living in units – this is likely why their performance is holding up much better than in some of the other capital cities, where unit living is a more recent trend.
However, in markets like Brisbane, Adelaide and Perth, it’s a different story.
In construction terms, it’s only been in the last three or four years in Brisbane and Melbourne that there have been more units than houses approved for construction. I wouldn’t be surprised, given that there’s a lot of stock under construction, if we start to see higher levels of loss upon resale of units in those cities, particularly in the inner-city areas.
The pockets experiencing serious oversupply in Melbourne include the innercity areas, such as Southbank, Docklands and the CBD. We’re seeing a huge amount of new supply in these suburbs. In Brisbane, the areas of Fortitude Valley, Teneriffe, Newstead, South Brisbane and West End are seeing a massive surge in new unit supply at the moment.
Perth and Darwin are continuing to weaken, not just in apartment sales but in houses as well. We see more houses and units reselling at a loss. Those markets are really being plagued by low demand at the moment; a lot of people are leaving the Northern Territory and Western Australia for other parts of the country, which points to further weakness in those markets.
In terms of capital cities versus the regional markets, since the financial crisis there’s been very little growth in a lot of regional areas across the country. We’re just starting to see a bit of recovery in some of those major regional areas.
This divergent performance trend between houses and units is widening in most capital cities. It feeds into the sentiments that have dominated commentary over the last couple of years regarding concerns about oversupply of units, and many areas are set for further losses before the recovery begins.
Cameron Kusher
is head of research at CoreLogic,
specialising in primary and secondary data analysis
