Developers are in for a world of pain after the evacuations of Sydney’s Opal and Mascot Towers within six months of each other.
An oversupply of apartments will force many into offering special incentives to shift excess stock.
But a growing mistrust of construction standards will mean fewer buyers lining up.
Suburbanite director Anna Porter told The New Daily the recent evacuations would make life much harder for developers.
“There are already oversupply issues, and these [evacuations] will exacerbate them,” she said.
“Because if people are concerned about buying off-the-plan units or new units, that’s going to further lower demand – and then the oversupply will absolutely not be absorbed.”
Ms Porter said that consumers were already wary of buying off-the-plan properties, because of the increased settlement risk they posed during falling markets.
“[The Mascot Towers evacuation] just solidifies that there are multiple levels of risks for buyers,” she said.
“People will certainly think twice now before going into any off-the-plan or new apartment purchases.”
Wakelin Property Advisory director Jarrod McCabe agreed the recent evacuations would have a significant effect on consumer confidence in new apartment buildings.
He said that the market had been struggling since the government clamped down on foreign investment in residential property in 2017.
That year’s federal budget slugged foreign investors with $600 million of increased taxes and charges, and restricted developers to selling no more than 50 per cent of a development to foreign investors.
“[Those changes] significantly reduced the buyer pool, which made it harder to keep up demand,” Mr McCabe told The New Daily.
“And those international investors who did come in and buy off-the-plan units now can’t sell them to other international investors, because they’re not new properties any more.”
Mr McCabe said the fall in foreign investor activity had been compounded by the lack of owner-occupier appeal found in many off-the-plan developments.
“The type of property that is being built is not necessarily what is in demand. I think there needs to be a greater focus on owner-occupiers than investors,” he said.
Factor in the growing public mistrust that’s flowed from the discovery of combustible cladding and dodgy sunset clauses, Mr McCabe added, and it’s hard to see anything but tough times ahead for developers.
“All those sorts of things start to build and create a negative perspective. And that makes it a lot harder for developers to attract buyers,” he said.
Ms Porter and Mr McCabe’s comments come after Deakin and Griffith Universities on Tuesday released a report that found 85 per cent of apartment buildings had at least one defect – and follow renewed calls for greater regulation and enforcement.
Meanwhile, the ABC reported on Tuesday that some developers were offering to pay 12 months of a buyer’s mortgage, as well as $15,000 in Freedom Furniture gift vouchers, in a bid to shift excess stock.