Evidence continues to show that the oversupply of new apartments around Australia is putting downward pressure on rents, tilting the balance in favour of tenants over landlords.

This week it was the turn of the Reserve Bank of Australia, no less, to chime in on the subject, with specific warnings around the Brisbane and Melbourne markets.

RBA documents obtained under Freedom of Information laws show the central bank is worried about Brisbane and “an oversupply of investment grade apartments in certain areas outside of the CBD precinct in the 2017 period when projects are completed.”

It also notes “some signs of softening” in the rental market in inner city Brisbane as well.

In Melbourne, which is expected to add over 16,000 brand new apartments in the next two years, will have similar conditions and this will impact on property prices, not just for apartments but also in the wider market.

Data from CoreLogic two weeks ago showed that capital city rents have been falling at the fastest pace on record, dragged down by softer markets such as Darwin, Perth, and Adelaide.

The Australia Bureau of Statistics points in the same direction, and it is only Sydney and Melbourne which helped national rents rise a modest 0.7 percent in the September quarter.

If Brisbane and Melbourne join the downward trend, the renters will be on the front foot and anyone not asking for a rental reduction could be throwing their money away.

Beyond rents, the implications for the wider housing market are significant.

The over supply of apartments will mean that many developers will have to offer rental guarantees to get the investors in, which means they may subsidizing rents. Nice turn up for the books that one!

In this scenario, apartment prices will fall, initially creating a two speed property market split between units and homes.

Could this spread to the wider market and burst the property price bubble?

It’s too early to say as yet, but watch this space.

Depending on where you live, it might be time to start thinking of moving if you are a renter.

That brand new development, with all mod cons, a gym and a pool plus a parking space might do nicely.

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