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Residential property oversupply effect not drastic

The oversupply of residential properties in Australia’s capital cities is unlikely to have as significant an impact on the market as first expected, according to a specialist fund manager.

“We talk about this oversupply coming, but the experts are saying it’s not going to affect the values as much as what everyone thinks,” Trilogy Funds head of lending Paul Wood told the recent SMSF Trustee Empowerment Day 2016. Wood added that was not a new set of circumstances for the domestic residential property market.

“I think that’s happened traditionally in Australia, hasn’t it? We’ve seen if prices do go back, they don’t go back by a lot,” he said.

“People are willing to hang on and then away they go. You know they get through it.”

According to Wood, figures released by research house BIS Shrapnel as at June 2016 lent weight to his argument.

“They’ve come out and said they do think there will be some reductions in prices, however, they’ve outlined that Melbourne, where I think everyone thinks will be the most oversupplied market, will experience a drop by about 8 per cent,” he noted.

“That’s’ not a huge drop. Sydney’s predicted to drop by 5 per cent where there are a lot more purchasers.

“And in Brisbane, where a lot of our lending is, the median unit price is forecast to fall by 6 per cent.”

The statistics Wood presented also showed BIS Shrapnel expected the median unit prices in Canberra to fall by 4 per cent over the next three years, and those same prices to dip by 5 per cent in Perth.

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