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After record levels of planning approvals and construction, prices for medium and high-density apartments in several capital cities are starting to come under pressure.  There is potential oversupply developing, particularly in Brisbane and Melbourne and to a lesser extent in Sydney.

An out-of-balance supply-demand ratio can have an impact on buyer confidence and prices.  In a market with oversupply, investors will face possible extended vacancies, poor rental growth and lower capital growth in the short term.

Investors need to tread carefully in this sector and never speculate on quick gains in a low-interest rate environment.

If you’ve already bought a property in a location facing oversupply, it would be wise to get some professional advice.  Property is a long-term game and eventually the supply-demand ratio should return to balance.  But a buyer needs to understand their opportunity costs.

There are stil lgood buys in these markets. You’ve just got to play smart or seek the help of a qualified property investment adviser to identify the opportunities.

Ben Kingsley, chair of Property Investment Professionals of Australia (PIPA).

 

Money Magazine, September issue, p.12