Apartment prices to tumble by up to 20 percent: AMP Capital's Shane Oliver
Apartment prices in capital cities could fall between 15 to 20 percent over the next two years, AMP Capital's chief economist Shane Oliver has forecast.
Dr Oliver says "there was a massive multi-dwelling building boom going on in Brisbane, Sydney, Melbourne and Perth".
"There's a real risk of oversupply," he told Money News.
"I wouldn't be surprised to see outright price falls in apartments in Sydney, Melbourne, Brisbane and Perth," he said in his earlier note to clients.
"So people are better off waiting until the dust settles to see if there are any opportunities to buy apartments with a lower price tag."
"Obviously if you are buying in an area where there are lots of cranes around, the price falls are going to be greater," he said.
A "heat map" of cranes would show the concentration of cranes were highest in the Melbourne CBD whereas Sydney's apartment construction was more spread out, he added.
Dr Oliver said a slump in the Australian housing market would be driven by a glut of supply rather than investors defaulting, unlike the subprime crisis in the US in 2007.
"I don't think one should get too alarmed here because you've first got to put this in context," he said.
"We've just had a massive run up in home prices across Sydney and Melbourne across the last four years, and that includes apartment prices."
"Just bear in mind that comes on the back of 30 to 40 percent gains over the last four years, so we really need to put this in context."
He said that investors or home buyers looking to buy a home should be cautious.
"Just allow that there is a lot of supply coming on, that's already putting downwards pressure on rents."
Shane suggested that he thinks supply in Australia over the next couple of years will put a major downwards pressure on prices in certain areas.
"At some point I think is that supply continues to mount and don't forget we saw another spike up in approvals to build new apartments just a month or so ago that's still continuing.
"If you are in the market for a home, try and go for those areas where there is stronger demand relative to the supply that's coming on."