Part of Perth’s issue is too many new apartments: Terry Ryder

Part of Perth’s issue is too many new apartments: Terry Ryder
Part of Perth’s issue is too many new apartments: Terry Ryder

Part of the message in this week’s release of price statistics in Perth was an oversupply of properties in the market.

It’s a theme that will recur increasingly in major markets around Australia: contrary to the vested-interest message from the developer lobby, the biggest issue facing real estate is not shortages but surpluses.

In Perth, according to the Real Estate Institute of Western Australia, the growing numbers of homes available for sale has tipped the market into significant oversupply. As a consequence, prices are falling.

Part of Perth’s issue is too many new apartments in the market. The CBD, West Perth and East Perth unit markets all have vacancies of 7.5% or higher and there is massive new supply in the pipeline. The number of apartments to be completed in Perth’s inner suburbs this year is 52% higher than the previous record year – at a time when demand is declining.

This issue will be repeated in other major cities around Australia: rising numbers of properties for sale, in excess of the number of buyers, exacerbated by the insane resolve of developers to keep building mega apartment towers.

The Perth inner-city apartment market features strongly in the new edition of the No Go Zones report I published this week.

The oversupplied unit market problem is one of two core issues at the heart of this report. The other is resources-related locations where developers built too many new dwellings, unaware that most of the new workers coming into their areas would be FIFO personnel staying in temporary workers camps.

Perth is not alone in having high inner-city vacancies set to get worse as new projects are completed. Melbourne and Brisbane also have too many empty apartments but are building more – far too many. The Gold Coast, which can’t seem to shake its boom-bust addiction, is hurtling towards its next catastrophic oversupply.

A recent report purporting to be credible research claimed that Brisbane would run out of apartments to sell within five months. This conclusion, which had property professionals chuckling all over Brisbane, was generated through creative accounting by an entity that makes its living selling inner-city apartments.

The reality is that the Brisbane CBD vacancy rate is already 5% and will get considerably worse as the new high-rise developments are completed. Surrounding suburbs are in similar situations. As I have reported previously in this column, only 10% of buyers in this market are home-buyers and most of the investors who make up the other 90% are distant investors. This is a clear signal to steer clear of this market.

Sydney’s inner-city apartment does not have any oversupply issues – not yet. But it’s headed down the same slippery path as Perth, Melbourne and Brisbane. The number of apartments to be completed across the Sydney metropolitan area over the next three years is double the historical average rate of construction.

The developer lobby’s claims of shortages will begin to look silly over the next couple of years as vacancies rise and values decline. The record rate of construction of new apartments is coinciding with the end of the Sydney property boom.

Properties listed for sale are rising fast as sales rates and auction clearance rates fade.

Developers are banking on being able to sell their stock in Asia. The recent marketing launch of a Melbourne project of 140 units was typical: the project was launched simultaneously to buyers in Beijing, Shanghai, Kuala Lumpur, Sabah and Singapore – with no attempt to sell any apartments to local buyers.

Like most of the major unit projects under way in Melbourne – and elsewhere - they’re not being built to meet local demand. They’re being targeted on Asian investors. 

The outcome will be the city’s greatest ever over-supply, with double-digit vacancy rates. Other analysts, like BIS Shrapnel, have made similar predictions. Paul Nugent of Wakelin Property Advisory has said: “Get out as soon as possible [otherwise] it will take 10 to 15 years before you get your money back.”

This is why Melbourne’s inner-city unit market is part of the No Go Zones report – which lists the ten markets across Australia that investors must avoid.

History has shown that the one factor that can collapse property values in Australia is oversupply – and that’s where the locations listed in this report are heading.

Terry Ryder is the founder of You can email him or follow him on Twitter.

Terry Ryder

Terry Ryder

Terry Ryder is the founder of

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