In some capital cities tens of thousands of new units will be finished in the next two years.

CoreLogic RP Data has revealed the suburbs where ten of thousands of units are expected to be completed in the next two years.

And inner city Melbourne, Sydney and Brisbane top the list.

Analyst Cameron Kusher has warned that with so many units tipped to be finished at the same time, people who committed to buy years ago may no longer be able to settle on them once they are built.

Cameron Kusher of CoreLogic RP Data.Source:Supplied

While that would be bad news for the developer, it could also affect the rest of the property market according to Mr Kusher.

“When you have a look at what is happening with construction, we are seeing record high levels of new construction and obviously some of our customers who are lenders are growing increasingly concerned about how much stock is being built and the risk

arising when those properties come up to settlement,’’ he said.

“Particularly over the last six to twelve months the lending environment has changed quite a bit.’’

Mr Kusher said changed market conditions or lending practices meant that some off the plan buyers would no longer be able to secure finance to settle on their purchases if valuations came in lower or banks were not prepared to lend as much.

“I think the potential risk is the affect it has on confidence in the housing market and obviously from a lender’s perspective if they are exposed to a lot of these losses it might change how they lend elsewhere in the market as well.

“They might have to tighten their lending criteria further, people might find it harder to actually take out mortgages and for the inner city unit market it makes it extremely difficult if these properties don’t settle for anyone, even in the established market, to then go and sell their property.

“It doesn’t just affect the price of new units it affects the price of existing stock as well.’’

“It may not be as big a problem as us and others think, people might be able to stump up that extra cash might find a way to settle on their property.’’

But Mr Kusher warned anyone buying off the plan should be aware of it.

He analysed the five year average number of sales for units in each capital city.

More new units will be finished in Melbourne in the next two years than any other capital city.Source:ThinkStock

Sydney averaged 43,000 sales of existing and new units every year for the past five years.

In the next two years there are expected to be almost 82,000 new units settled.

Melbourne averaged just under, 31,000 new and existing unit sales every year with 80,500 new units tipped to settle in the next two years.

Brisbane averaged just under 15,000 unit sales each year compared to 44,500 new units expected to settle in the next two years.

Mr Kusher said these figures showed there was a big disconnect between the average number of units which sold every year and what was due to settle.

“Obviously settlements and sales aren’t quite the same thing, but I guess the concern is that in order to actually successfully settle this level you need to create an unprecedented level of sales activity.

He couldn’t think of anything that would trigger that “unprecedented level of sales’’.

“Particularly when you have a look at other factors like population growth is slowing, even things like the rental market is quite weak so a lot of people who buy these properties are ultimately investors,’’ he said.

“They are facing higher interest rates now than owner occupiers, they may have thought they could borrow up to 95 per cent, that may now have been trimmed back to 90 per cent so there is a couple of reasons for concern around how much stock is coming up for settlement.’’

Substantial new unit stock would settle in the next 24 months.

Across the combined capital cities there were 92,102 new units set for completion in the next 12 months, with that rising to 231,129 during the next 24 months.

Regions with the highest number of unit completions expected. Source: CoreLogic RP Data.

Mr Kusher said in many regions price growth for units had been substantially lower than that for houses.

“Many off-the-plan unit buyers would have expected a level of capital growth between contract and settlement.

A compounding issue was that three of the four largest banks had announced they would no longer lend to overseas buyers which could result in a larger number of contracts not progressing through to settlement.