The potential for an oversupply of apartments to drag property prices lower has receded in Sydney and Melbourne, but the risk remains in Brisbane, a senior Reserve Bank official says.
RBA assistant governor (economic) Lucy Ellis said strong population growth in Australia's two largest cities, and easing apartment construction activity, means the chances of distress in those property markets are decreasing.
"One thing that makes me feel a little bit more confident about Melbourne in terms of this risk is population growth in to Victoria and in particular Melbourne has been very strong," Ms Ellis told an Australian Business Economists briefing in Sydney.
"That's not something that was envisaged earlier, so in some sense demand has increased so there is less risk of an oversupply there ."
Population growth is also quite strong in Sydney so it may not face a serious problem either, she said.
However, the pipeline of work has been quite imbalanced in the Queensland apartment market, which means Brisbane remains at risk.
"The properties that are more likely to fall in price are not the ones that are newly built, because what will happen is tenants will move from the five-year old apartments to the new ones which are even nicer, because rents are staying low," Ms Ellis said.
"So it will be the not new anymore, second-hand apartment market that might see some people make losses."
Ms Ellis said there is no evidence at this stage that supply in itself is going to cause a fall in property prices.
Recent data shows apartment price growth is trailing house price growth, a trend that is expected to continue as more units and townhouses come onto the market.
Average prices for units, townhouses and terraces rose 6.6 per cent over the year to June 30, while the value of detached dwellings increased 11.1 per cent over the year, according to the Australian Bureau of Statistics.
