Tumbling Brisbane apartment prices and rising investor defaults have been blamed on developers and lenders failing to heed the obvious warnings signs.
Property research outfit RiskWise says the over-supply of units and falling valuations in the inner-city are not new problems but the risk should have been identified by developers years ago.
“The continuous weakness of the unit market in inner-city Brisbane should have raised red flags for developers and lenders,” chief executive Doron Peleg said in a statement on Tuesday.
Mr Peleg said research showed the warning signs were clear as early as 2016 when prices for inner-city Brisbane apartments had fallen by almost two per cent over the previous 12 months but almost 20,000 units remained on the drawing board.
The alarm bells continued to ring over the next 24 months as valuations continued to drop but the number of units grew by almost 50 per cent.
“The point is that if developers and lenders put more proper risk-management practices in place, this could have been avoided,” he said.
“There was no methodological and structured risk-management approach to address those risks.”
Mr Peleg said developers had also failed to deal with the impact of lending restrictions introduced in 2014.
“Overall, it seems they were too optimistic about the projected market value, and it is highly likely that the price they paid for the land was also too high.”
Mr Peleg said the problem starts in the feasibility stage when the projected market value and the likelihood of defaults are assessed.
“Developers and lenders have to find the right balance between taking risk and making profit,” he said.