CoreLogic research director Tim Lawless told nestegg.com.au that the late market resurgence in Sydney and Melbourne is irregular.
“Since around 2009, we’ve seen Melbourne dwelling values go up by 85 per cent and Sydney by 95 per cent so we’ve seen those markets reaccelerating on the back of low mortgage rates, and a bounce back in investment activity does come as a bit of a surprise,” Mr Lawless said.
“Normally, when you start to see momentum leaving the market from late 2015 through to the first part of 2016, it’s pretty uncommon for there to be a rebound like we’re seeing at the moment.”
Mr Lawless said it is unlikely that reacceleration can be sustained given market constraints.
“It probably can’t last that long. We probably will see a return to more moderate growth for both those markets simply due to affordability constraints, higher supply levels, particularly in the apartment market, and lenders becoming a little more cautious on lending to property markets that have already seen a substantial level of capital gain over the last two growth cycles,” he said.
Key to that downward pressure is apartment oversupply, which continues to raise questions about the sustainability of apartment values.
“The supply we’re seeing coming on to the market at the moment in Melbourne at least is very inner city apartment-centric. We have seen a peak in approvals so we’re probably due for a construction peak next year or the year after,” Mr Lawless said.
“I think the impact on the Melbourne marketplace is going to be quite specifically on those inner city investment markets, whereas detached housing supply is very balanced if not undersupplied. Inner city areas are where we could potentially see some negative movements in unit values given that stock that is facing high supply levels and doesn’t have any sort of differentiation and is exposed to the investment and buyer market.”
In Sydney, however, the supply and construction of apartments conversely has been far more geographically diverse.
“While the inner city is where the largest proportion is being built we’re also seeing a lot of densification alongside the transport lines in Sydney, in areas like Parramatta, Mascot, Chatswood,” Mr Lawless said.
“Arguably then, Melbourne is much like Brisbane, where it’s early in its densification trend and most of the high-rise apartments are happening in precise locations.”