Australian apartment market faces trouble
Dwindling buyer appetite and tighter lending restrictions could spell serious trouble for apartment sellers.
Property analysts have warned the apartment market faces collapse as a flood of new stock prepares to be released onto the market over the next two years. Development Finance Partners principal Baxter Gamble has told the Australian Financial Review major banks’ “Illogical and unreasonable” restrictions on off-the-plan buyers could see a wave of apartment sales as purchasers find themselves unable to obtain finance.
"An occasional inquiry from a stranded purchaser is now turning into a full-blown queue of apartment buyers who signed up off-the-plan in good faith only to be advised that they are unlikely to obtain a mortgage without first finding a much larger deposit," Gamble told the AFR.
Gamble said purchasers unable to obtain finance after signing contracts on off-the-plan properties could be forced to unload them “at fire sale prices”.
The apartment market also faces dwindling demand from Chinese buyers due to tighter restrictions on lending to foreign developers, the Australian reported.
“Chinese demand is falling off because it’s getting harder to bring money out of China and there’s more stringent financing here, so they are going for loans here through local banks, and local banks are not lending as much to these people,” Sydney-based Matrix Property director Andrew Antonas told the Australian.
Antonas said bank valuations of new apartments were falling 5-10% below what buyers had paid.
While developers in Sydney told the paper newly completed apartment blocks were still selling out, developers in Melbourne said off-the-plan apartment sales were falling significantly.
The revelations come following a report from CoreLogic RP Data that predicted a massive increase in apartment stock could put settlements at risk.