Unit oversupply fears may be overblown

Blow bubbles

While there has been ongoing anxiety surrounding the potential for oversupply in Australia’s major capital cities, these may have been exaggerated, according to a property research house.

CoreLogic head of research Cameron Kusher says Sydney is the least at risk of oversupply due to ongoing overall housing undersupply.

“At the moment, I wouldn’t say it's too much of an issue in Sydney particularly and the reason for that is youre not seeing an underperformance of units relative to houses,” Mr Kusher told Nest Egg.

“[With] the price point youre looking at for houses now, units have kind of become the only option for people looking for people to buy into the market.”

Meanwhile, Melbourne’s growing housing stock will likely face a mixed bag of factors.

“Were obviously seeing a really high level of unit supply coming online in Melbourne but were also seeing really strong population growth so when you compare the two, perhaps theres not as much of an oversupply as we previously thought,” Mr Kusher said.

“But we’re also seeing an underperformance of units so theres probably a mild oversupply because I think houses are still in reach for people to buy whereas theyre not necessarily in Sydney.”

However, the same cannot be said of Brisbane where the number of empty high rises is already evident.

“Brisbane is probably the area where were seeing the most evident oversupply of units and theres still a lot more in the pipeline,” Mr Kusher said.

“I live in Brisbane and as you walk around you can see a lot of units completed, a lot of the buildings have available ‘for rent’ signs all over them and theres a lot more to still come up for completion over the next couple of years.

“Overall, I think theres not too much oversupply in terms of total housing in Sydney and Melbourne, but there is a bit of unit oversupply in Brisbane and certainly potential for some in Melbourne.”

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