'People were snatching, not buying'

"People were snatching, not buying ... the display suite is going to close soon at this rate," Golden Age founder Jeff Xu said.

"There's a lot of talk about oversupply but show us where has it fallen?...Some popular areas like North Sydney, the better suburbs, the fundamentals are balanced."

The Melbourne developer's pick of "the right location" in Sydney has been right so far – Macquarie Park has followed its two successful inner city developments in Waterloo and Double Bay.

In Miranda, in Sydney's south, Galileo Group sold 50 per cent of the 100 apartments in its stage two launch of "Palisade Miranda". It sold out its first stage release a few weeks ago.

Golden Age sold 230 apartments on Saturday.

While empty nesters flocked to Miranda, first home buyers chased stock in Golden Age's Macquarie Park.

"What I saw yesterday was a lot of people buying apartments. I don't think they are oversupplied," said first home buyer William Young, who bought a one-bedroom apartment with a study in Macquarie Park.


Many 'are still waiting to buy'

The 26-year-old marketing executive said he was going to live in the apartment and might consider further apartment investments.

Chinese property website ACProperty.com.au's director Esther Yong, who sees unabated traffic travelling through her website, corroborated on the evidence of continued strong demand.

Queues return for off the plan sales. supplied

"People, generally local Chinese and some overseas Chinese, are still waiting to buy," she said.

Despite the demand, the Reserve Bank warned in its half-yearly financial stability health check on Friday about "a marked future oversupply in apartments in some geographic areas" particularly in Brisbane and Melbourne.

That said, it appeared relaxed about the housing market saying banks would only suffer material losses if prices fell by more than 25 per cent.

Prices could fall 25pc in 'pockets'


"In part they are correct but the RBA is overplaying it a little," property research group SQM Research's Louis Christopher said.

"They say growth has moderated and yes, up until the first half of the year, but there are many indicators particularly Sydney that says the market is accelerating again."

While Mr Christopher agreed certain pockets of the Sydney apartment market could experience a price correction of up to 25 per cent – for example, in Sydney's northwest and the CBD – it would not spread across the whole market. "The oversupply is not enough to create an almighty crash."

And while demand is strong now, the test for inner city apartments would be next year and in 2018 when many apartments have completed and come onto the market. The rise in rental stock could increase vacancy and suppress rents further, Mr Christopher said.

The fallout of any oversupply would be felt by investors then, not today.

Auctions 'abnormally high'

Importantly, the RBA's relaxed attitude to the housing market was a concern, especially with auction clearance rates continuing to charge ahead.

Over the weekend, 83.3 per cent of Sydney auctions sold, while Melbourne hit 78.5 per cent. Nationally, the auction clearance was 77.9 per cent, CoreLogic said.


Data from Domain's APM were similar for the past week – 80 per cent for Sydney and 79 per cent for Melbourne.

Compare this to the same time last year – Sydney cleared 66.6 per cent, Melbourne 73.6 per cent and the national clearance rate was 69.3 per cent, according to CoreLogic.

"It's really odd. Auctions are abnormally high for this time of the year," Mr Christopher said.

"If this persists, we will get double-digit capital growth, and if the RBA and the Australian Prudential Regulation Authority do not take action soon, this could force the RBA to lift interest rates."

But before they get to that, there was scope for APRA to act, this time in clamping down on owner-occupiers who were the source of the current demand, capitalising on low interest rates, he said.

Throughout the spring selling season this year, Australian baby boomers, empty nesters and wealthy home owners have been buying up properties and pushing up auction clearance rates.

"The message to the RBA is, don't be reliant on the oversupply of apartments to correct the market. It won't be enough," he said.