Despite worries about an oversupply of units in the Brisbane and Melbourne CBDs, some of the sharpest price declines have been in middle-ring suburbs where new development is creating an imbalance of buyers and sellers.
Older-style units in suburban areas are falling out of favour with local investors worried about limited prospects for capital growth, while restrictions on transferring funds out of China are having an effect, agents say.
Caulfield East, 8.8km from the Melbourne CBD, was the second-worst performing suburb within 10km of the city in terms of unit sales, with median unit prices falling 18.7 per cent in the year to March 31 compared with the previous year.
Essendon — 9.9km from the city centre — was third-worst, with prices dropping 12.6 per cent. Middle suburbs Kew East, Caulfield North and Ascot Vale declined between 10 and 12 per cent. However, the worst performer was inner-city Cremorne, down 19.4 per cent and 1.9km out, according to research compiled by REA Group using CoreLogic data.
Apartment oversupply in central Brisbane also has been in focus, but Brisbane’s middle suburbs recorded steep declines. Median unit sales prices dropped 20.1 per cent in Wooloowin, 6.3km from the CBD, and fell 16.1 per cent in Murarrie, 8.4km away.
The figures come after investment bank UBS said it had “called the top” of Australia’s property market, given rising mortgage repayment costs, a backlog of new supply and slow wages growth.
The unit price declines — based on actual sales that took place in a suburb, not estimated values, and excluding the heated market for detached family houses — could partly be due to a larger number of sales of small, less expensive units, according to REA Group chief economist Nerida Conisbee.
In Carlton, in inner Melbourne, prices declined 12 per cent. A significant number of new apartment blocks cater for students at the nearby University of Melbourne. But the price falls were also likely to be due to new apartment supply in middle-ring suburbs, meaning existing units from the 1970s in need of renovation could be falling out of favour, she said.
“Perhaps some of those apartments are not quite as desirable, not seeing quite the level of capital growth they were previously,” Ms Conisbee told The Australian. “If you’re an investor and you want something that’s easy to lease, if you buy a brand new apartment generally it’s far easier to lease a newer (apartment) than an older style apartment that needs a bit of work.
“There’s just been so much apartment development in Melbourne; although we are seeing an increase in the number of buyers it doesn’t match up to the number of apartments coming online.” Restrictions on Chinese residents transferring funds out of the country are having an effect, says Selling Melbourne Real Estate managing director Sam Liu.
In Brisbane, Ray White Clayfield agent Ashley Robinson said developers were doing “huge deals” to sell new apartments in areas such as Albion, which neighbours Wooloowin.