INNER city units in Sydney, Melbourne, Brisbane and the Gold Coast sold off-the-plan have been declared a “clear and present danger” to property buyers due to over supply forcing down prices.

A report by trends forecaster Hotspotting said the number of apartments being released exceeded current demand.

And units in Sydney’s “second CBD” Parramatta, compared to inner Sydney, posed an even greater risk to buyers on account of already falling sales volumes, the report said.

Analysts widely consider oversupply a red flag for off-the-plan buyers because it puts downward pressure on prices — increasing the risk of homes being worth less, when built, than their owners paid for them.

Hotspotting director Terry Ryder said inner Melbourne presented the biggest danger for buyers.

“New supply in Melbourne has gone way over the top but many buyers are unaware of this,” he said.

“The danger is that the risks aren’t glaringly obvious. In other markets buyers may have a better sense of what they’re getting into.”

Apartment buyers in inner Brisbane would face a similar problem, with Mr Ryder labelling it the country’s second most significant “no-go area”.

Sydney’s oversupply concerns were more long-term and would be confined to city pockets such as Green Square, the CBD fringe and Parramatta.

“Parramatta, in particular, is a concern,” Mr Ryder said.

“There is already a pattern of decline in sales but supply is still increasing. It’s a very dangerous combination.”

Across capitals, developers’ have sought to remedy supply imbalances by targeting foreign buyers, especially from China, in the hope they will absorb excess housing stock.

The strategy wasn’t working because Asia-based and local banks were clamping down on foreign lending, Mr Ryder said.

“Someone needs to rent those homes too but vacancies are on the way up in most inner city areas,” he said.

BIS Shrapnel analyst Angie Zigomanis agreed foreign buying was decreasing, resulting in softer demand overall.

“Foreign buying was at a peak 18 months ago but it’s been in decline since then,” Mr Zigomanis said.

Overall, inner city apartment supply was “a cause for concern” across the country but to a different degree in each capital, Mr Zigomanis said.

Inner Sydney would be the only major CBD market where rising supply would not push down prices in the immediate future, he added.

CITY MARKETS TO AVOID

Brisbane inner city

Demand is falling, while supply is rising. The dominance of interstate and foreign investors in this market means it will be heavily impacted by restrictions on capital outflows from China and local banks’ tighter lending criteria for investment-related loans.

Brisbane north side

Sales activity is on the decline and rental vacancies are increasing but there is still a long pipeline of projects in the works. Unemployment is also rising in some of the region’s suburbs, putting question marks on the level of demand for new housing.

Gold Coast high rise

The market’s short-term health is good but a long line of apartment buildings projects does not bode well for the future health of the market. “Gold Coast apartments (have) a poor track record on capital growth and a boom-bust history,” the Hotspotting report said.

Melbourne inner city

Vacancies are already on the rise but there are still more new units set to come up for sale and demand is showing signs of slowing. Deloitte Access Economic has predicted oversupplied unit markets in inner Melbourne could record price falls of up to 15 per cent in 2019.

Parramatta units

The median price of Parramatta units fell 6.3 per cent over the past year at a time when unit prices in the rest of the city increased by an average of about 10 per cent, according to Core Logic. Further price falls may be on the cards.

Perth inner city

The state economy is deteriorating, weakening demand for new housing. There is also an excess supply of housing available.

Sydney inner city

The problem is longer-term. Price growth will be impacted as buyers of off-the-plan apartments sell into an oversupplied secondary market, achieving less than they paid.