In Sydney, the valuation firm suggested investors steer clear of apartments in newly created high-density zones, including areas like Haymarket, Chippendale, Zetland, Waterloo and Parramatta.
“These new units are achieving premiums as a result of both local and overseas investors pushing demand but also developers taking advantage of buoyant property markets and government incentives for new property,” the report states.
“If these government incentives for local and international purchasers were to end or change, then the premiums that new stock can achieve may be affected and demand for new property may slide.”
The report warned against off-the-plan properties, semi-rural areas far from designated growth corridors and suburbs neighbouring current growth leaders.
Investors in Melbourne are advised to avoid outer suburbs with few amenities, including Braybrook, Sunshine and Cranbourne.
According to the report, inner-city apartments tend to be poor quality and may lose value as the oversupply worsens.
Brisbane is one of the major cities facing this issue, with its CBD and inner-city areas such West End, Newstead and south Brisbane boasting an excess of new apartments.
“The problem now is that with growing interest from out-of-town buyers, developers can stack up projects with smaller units that appeal to investors rather than owner-occupiers,” the report states.
“Unfortunately this market could see a glut of this style of attached housing with a basic standard of product specifically marketed to those from interstate or overseas.”
The report also highlighted the oversupply of house and land in the northern suburbs of Adelaide, while Hobart’s southern suburbs are identified as having “limited investor appeal”.