Apartment market fears
Canberra's apartment market is in danger of oversupply in some areas as future developments crowd the market, a new report claims.
Research conducted by Colliers International concluded that the market had plateaued, stating that developments were requiring higher pre-sale figures to secure construction.
At present there are seven projects comprising 673 apartments yet to commence construction in the capital, which are at risk of going under, Colliers International's director of research, Ariel Pollard, said.
''They are 40 per cent sold and will be under threat of not going ahead if pre-sales for these projects are not met and further developments are taken to market,'' she said.
The Canberra Apartments Research and Forecast Report should be taken as a warning by developers and the ACT government, said Colliers International's state chief executive, Paul Powderly. ''We're at a crossroads now,'' he said.
''It's not dire straits yet but it has the potential to get bad.''
Mr Powderly said the market would be pushed into oversupply if further land release by the government was not strategic, or if developers ignored market demands.
He said there would be no upside for renters or buyers, as developers would not slash prices in a bid to build up sales.
''If a developer can't get pre-sales, then he won't end up building,'' he said. ''It's not like there will be all these apartments sitting around going cheap.''
However local agencies do not believe the market is oversupplied, with Independent Property Group's sales and marketing director, John Minns, saying that the market tended to self-regulate.
''The market tends to balance itself out,'' he said.
''There are a number of projects that have approval [that] I imagine will not be built for some time.''
Mr Minns said the right product designed for specific markets had been popular, but there were some projects about which there were ''some doubts as to whether they're going to proceed or not''.
These were not projects Independent Property Group was involved in, he said.
Concerns regarding developments not getting off the ground primarily affected larger projects, the Real Estate Institute of the ACT president, Craig Bright, said.
''If you look at the smaller developments, they seem to still be selling quite well,'' he said. ''We saw this in the 1990s, where the market got out of equilibrium. It can turn around pretty quickly.''
The Colliers International report detailed the increase in supply between 2006 and 2011, listing growth of 91 per cent in Civic and 63 per cent in Forrest.
It also identified 5485 apartments in various stages of the planning process within the inner ring of Canberra, with the inner south recording the highest number of apartments awaiting approval at 493. Almost 70 per cent of that supply is in Kingston.
Despite concerns over projects that were yet to commence, the report stated that completed developments or those under construction were faring well in terms of sales.
In the year to date, 1633 apartments were sold at an average price of $458,134 in the inner north. This compared to 575 apartments sold for an average price of $549,070 in the inner south.