Nearly half of new apartments in Sydney and Melbourne are now valued less than what the buyer paid off-the-plan.

Despite approvals for new projects falling sharply, CoreLogic data says Australia's two major property markets will have an oversupply in the next two years which will further weigh on the falling property market.

The data found 45 per cent of new apartments in Sydney settled in February were valued less than the off-the-plan purchase price compared to just 18 per cent a year earlier.

In Melbourne it was 46 per cent, jumping from 23 per cent in a year.

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CoreLogic head of research Tim Lawless said there are fewer local and foreign investors compared to two years ago when apartments were bought off-the-plan.

This is compounded by the tighter lending restrictions as a result of the banking royal commission.

"Across NSW there's around 60,000 apartments being built and across Victoria it's closer to 50,000 right at the time when the market's in quite an entrenched downturn," he told news.com.au.

Lenders are now more likely to be seeking 20 per cent deposit from buyers, which Mr Lawless said may result in "finance shock" for those struggling to scrounge together an extra $10,000 or $20,000.

"And if the values have gone down, they may need to have to prop up their deposit in order to meet their lender's requirements," he said.

Investors are facing a double-edged sword with higher mortgage rates and weakening rental prices because of the apartment glut.

"If the buyer can't settle or doesn't want to settle, then obviously they'll lose their deposit and the developer may chose to hold the stock," Mr Lawless said.

He told news.com.au holding on to apartments and leasing themselves was a feasible alternative for large developers such as Meriton but not so for smaller groups unable to carry the costs.

Co-founder of development company The Stable Group Ed Horton told The Australian his group won't be dropping prices or advertising the remaining apartments still for sale in its 98-apartment The Burcham project in Sydney's inner Rosebery.

He said the apartment oversupply will be "short-lived" as the decline in construction approvals catches up to the market.

"Talk to any valuer with their finger on the pulse and they will tell you the numbers are nowhere near the projections," Mr Horton told The Australian.

"I've never seen so many no-starts."

He said The Stable Group intends to buy sites later in the year as prices fall but insists the issue of oversupply is varied in different areas across Sydney.

"You would be barking mad to do a project where there are a lot of cranes in the sky," Mr Horton said.

- News.com.au