Urbis has warned of an impending shortage in the residential apartment market in Sydney despite the high number of unsold units.

Only 6 percent of new apartments found buyers in the 2018 final quarter; however, the rising demand for apartments in the owner-occupier market combined with declining project launches could widen the supply gap with a lesser number of units available for buyers.

Only five projects were launched in this quarter, indicating that the current oversupply may be short-term.

Urbis national director Clinton Ostwald predicts that the Sydney market is heading towards a situation where the supply cannot keep up with demand.

This demand is driven mainly by first-home buyers but bank lending restrictions are limiting their access to finance.

Developers are also facing the risk of off-the-plan purchases and undervaluation, leaving them struggling to accomplish the minimum pre-sales required for projects to proceed.

Compared to 2017 figures, the total number of apartments launched in 2018 was 24 percent lower at 7459 units. Single bedroom + bathroom units made up a major part of the sales, underlining the rising demand for affordable entry-level apartments.