Apartments purchased off the plan in central Melbourne are losing around 11.5 percent of their value in the first year, the latest research has found.
In a recent study, property valuation outfit WBP Property Group looked at the value of fourteen apartments located throughout Central Melbourne which were purchased off the plan within a year of their sale date.
As reported by the Australian Financial Review, the average valuation came in 11.5 percent of $68,000 lower compared with the original purchase price.
According to WBP, the research was conducted following anecdotal evidence of a growing number of transactions whereby its valuations were falling short of the purchase price at the time of settlement.
The company says this is raising concerns that many buyers may not have the capacity to meet their financial commitments on apartments at the time of settlement.
The latest research comes amid ongoing levels of concern about a likely correction in the market following a massive period of building activity around a number of major capitals in Australia.
At its bi-annual forecasting conference earlier this year, BIS Shrapnel said it expected an overall housing oversupply to emerge next year across a number of markets, with Melbourne expected to be in oversupply by 21,900 dwellings (mostly apartments) and markets in Perth and Brisbane to be oversupplied by 9,000 and 6,400 respectively.
Part of the reason for this revolves around the massive volumes of new stock which are set to come on to the market amid record breaking levels of building activity.
On a national basis, Housing Industry Association expects that ground broke on 220,060 new houses and apartments throughout the country last year whilst work will start on almost 200,000 again this year.
In inner Melbourne alone, approval was granted for almost 16,000 units, townhouses and apartments throughout 2014/15 and 8,131 in the first seven months of the current financial year, ABS figures suggest.
At the same time, BIS managing director Robert Mellor said, demand drivers are in decline as net overseas migration levels have halved from a peak of 300,000 at the beginning of the mining boom to an expected 150,000 this year and investor demand had eased amid a tightening of credit in response to stricter lending guidelines being imposed by the Australian Prudential Regulatory Authority.