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Warning: Oversupply causes ‘danger’ hotspots in these areas

High-rise towers in Parramatta city CBD of Sydney Western suburb in elevated aerial view towards distant Sydney CBD.
High-rise towers in Parramatta city CBD of Sydney Western suburb in elevated aerial view towards distant Sydney CBD.

Investors are being warned against buying property in four ‘danger’ suburbs across NSW due to an oversupply of new developments.

Parramatta, Mascot and Rouse Hill in Sydney are expected to see 1,500 more apartments built, representing a 13 per cent hike in the number of apartments within the next two years, property experts told realestate.com.au.

Meanwhile a surge in new developments in Gosford on the NSW Central Coast is expected to add a further 1,900 apartments, which would cause a 73 per cent increase in the number of units available in the area.

The oversupply has the potential to cause ‘dangerous’ price reductions.

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RiskWise chief executive Doron Peleg said there were already risks associated with off the plan units but they have been exacerbated during the COVID-19 pandemic.

One of the biggest risks is that the glut of new apartment projects in some areas will coincide with reduced buyer demand – particularly from investors, he said.

Investor activity was low before the pandemic because of tighter lending restrictions but falling rents and rising vacancies have created a further disincentive for new investors to purchase units.

The sector has also taken a beating due to several new buildings suffering defects with buyers already warned that 97 per cent of apartment buildings in NSW have defects, and a further 85 per cent across Australia have some sort of defect.

These high-profile reports of cladding issues and defects also damaged the reputation of the off the plan sector, encouraging more investors to seek out house-and-land packages instead, Mr Peleg added.

Buyer advocacy group Buyers Buyers' co-founder Pete Wargent said the risks in oversupplied suburbs were compounded by border closures due to the COVID-19 pandemic.

As a result of the lockdown there were less tourists and international students to take up tenancy in apartment blocks, he said.

Instead, he encourages buyers to seek out investments which offered 'scarcity value'.

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