Apartment oversupply is at its worst in these two Aussie areas

With residential building at record levels and markets headed for oversupply, Frank Gelber, the chief economist at BIS Shrapnel, expects the worst impact will be in Melbourne and Brisbane inner-city apartments where the oversupply will be greatest.

Also read: Does Australia have a greater housing oversupply than the US?

He says the tightening of lending is containing the extent of damage from oversupply — but not completely.

Apart from Melbourne and Brisbane inner city apartments, the oversupply is not large.

He says the downturn will not be uniform

"We’re building too much and headed towards oversupply in most capital city markets," he wrote in The Australian.

Also read: 120 Aussie suburbs could be set for a price plunge

"The exception is Sydney where a decade of under-building led to extreme deficiency — hence the magnitude of the upswing — so that, even given the escalation of building, there remains a significant deficiency of residential stock."