Apartment values in Australia’s big cities are set to plunge, with prices in one suburb to plummet as much as 50 per cent according to one industry observer, as Chinese buyers abandon off-the-plan residential tower projects.
Ryde, in Sydney’s north, is Australia’s second-worst performing property market with dwelling values diving by 14.8 per cent during the past year, CoreLogic data showed.
Digital Finance Analytics founder Martin North, an economist, feared apartment values there could be sliced in half during the next three years before stagnating for a decade.
Apartment values in Australia’s biggest city could plunge by 50 per cent as Chinese buyers abandon off-the-plan residential tower projects (Sydney Olympic Park pictured)
‘We’ve got massive oversupply in those areas but you’ve just got no demand,’ he told Daily Mail Australia on Friday.
‘Some of the central high-rise apartments in the inner urban areas, like Ryde, 40 per cent now is certainly feasible.
‘In the worst case, you could see unit prices nearly halve.’
Starr Partners chief executive Doug Driscoll, who specialises in the Sydney real estate market, said Mr North’s forecasts were far fetched.
He did, however, blame councils for approving too many developments.
‘We had an influx of foreign investment. We had an environment of record low interest rates, money was easily available – these things don’t last forever,’ he told Daily Mail Australia.
‘In some suburbs, in some pockets, we have seen an oversupply.’
During the past year alone, Sydney’s median unit price has plunged by 7.8 per cent.
Since peaking in July 2017, they have fallen by $83,700 or 10.8 per cent to $693,350.
The Ryde area in Sydney’s north (Macquarie Park project pictured) is Australia’s second worst performing property market with dwelling values diving by 14.8 per cent during the past year, CoreLogic data showed
Mr North said an oversupply of new apartments in inner Sydney, Melbourne, Brisbane and Canberra was a threat to Australia’s economic growth.
‘This is a very significant economic risk to that sector of the economy,’ he said.
‘In Sydney and Melbourne in particular and Brisbane to an extent, this is a really big deal but I’d also highlight Canberra – there’s been a massive boom in apartment development.’
Canberra’s median apartment price actually rose by 1.1 per cent during the past year.
Equivalent Darwin values have plunged by 14.4 per cent.
Chinese buyers have abandoned off-the-plan apartment projects in Sydney, causing residential projects to be stopped in some cases as developers struggle for finance.
The Sydney and Melbourne property markets have been in decline since 2017, when the Australian Prudential Regulation Authority imposed stricter lending rules for investor and interest-only loans.
Mr North said off-the-plan buyers, who had paid a 10 per cent deposit two years ago, were now either struggling to get a bank mortgage or owed more than the promised value of their new apartment.
‘When it comes to time to complete the transaction and get the mortgage, they discover that they can no longer get the mortgage they thought they were going to get,’ he said.
The Christmas Eve evacuation of 300 residents from the newly-built Opal Towers at Sydney Olympic Park, in the city’s west, highlighted quality issues with new apartment projects
‘Some of the overseas buyers who went through this process disappear back overseas and of course the developer has no way of following up.’
The Christmas Eve evacuation of 300 residents from the newly-built Opal Towers at Sydney Olympic Park, in the city’s west, highlighted quality issues with new apartment projects.
Martin North (pictured) is forecasting 50 per cent falls in Ryde, Sydney apartment values
‘You’ve got the overhang of the questions about construction standards and quality which is the Opal Tower effect,’ Mr North said.
Many first-time home buyers had chosen brand new or off-the-plan apartments to avoid paying hefty stamp duty in New South Wales.
Mr Driscoll, who specialises in the Sydney, Newcastle and Central Coast markets, said there was a danger in buying off-the-plan apartments in areas with a glut of new units.
‘If there’s an area where there’s thousands of new apartments constructed and being built, completed, you’re facing fierce competition,’ he said.
‘If you are buying in an area as an investor where it’s now become heavily saturated with new apartments, the pain point’s going to be you’re going to struggle to rent the place out.’