Unit glut leads to discounting

24-02-2005

From: News Interactive

Slow sales ... Emerging oversupply is forcing some developers to cut inner-city unit prices in Sydney by up to 20 per cent to entice buyers

HEAVY discounting of inner-city apartments is helping to lift their affordability, especially when combined with first home owner grants, according to the Housing Industry Association.

The association's chief economist, Mr Simon Tennent, said lack of investor interest in Sydney apartments meant some developers were discounting stock in the hope of capturing the first home buyer market.

Properties were also being discounted in inner-city Melbourne and Brisbane, where there is a glut of units.

"I know of an (apartment) developer who has dropped prices 20 per cent to make sales and they've already had an impact at the lower-priced end of the market," he said.

This discounting could bring city apartments within reach of first home buyers, especially when combined with state government stamp duty concessions and the Federal Government's first home owner's grant, Tennent said.

"There is still some way to go. The first home buyers are a bit thin on the ground, but we're optimistic," he said.

However, Mr Tennent said first home buyers would have to be vigilant to spot bargains as he did not expect to see developers discounting across the board.

Real Estate Institute of New South Wales president Rowen Kelly agreed that first home buyers would be a strong force in the apartment market in 2005.

But he said apartment developers had already cut the amount of new product coming on the market and this, combined with other factors, would keep prices stable.

"I think 2004 has been the big year for substantial decrease in turnover, yet we've still only seen a 1 per cent drop in median sales price (for apartments)," he said.

Mr Kelly also said the State Government's controversial vendor exit tax created an "artificial undersupply" in the market, as many investors were not prepared to sell properties.

Figures released this week by statistician Residex showed apartment sales in Sydney in the December quarter 2004 were down 48.15 per cent on the same quarter in 2003.

The slump was even more dramatic in Sydney's CBD, where sales in the December quarter 2004 were down 68.34 per cent on December 2003.

Apartment prices fell by only 0.8 per cent between the two periods.

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