Oversupply is when there are too many real estate properties of any given type and not enough buyers to purchase them. This often occurs when there is large economic growth and favorable mortgage regulations which forces the development of new structure to meet the growing economic demands.
- Example: In Montreal (as of 2016) there has been an oversupply of condominium buildings which has forced developers to slow their upcoming projects. Because developers reacted quickly to this oversupply, they have slowed development which has helped to stabilize existing condo pricing and also to ensure they are not building when no one is buying.
Oversupply can cause a bubble in the market and potential drops in market value, depending on how far the oversupply extends.