February 13, 2018

Now Buyers Are Allowed To Be Cheeky

A report from ABC News in Australia. “If you needed a sign Brisbane has an apartment oversupply, a two-bedroom unit with city views in one of the most trendy suburbs has just gone for $50,000 less than it was bought for two years ago. The Paddington unit, which sold for $440,000 after it was renovated, is just one of hundreds of units that have crashed in value since an apartment construction boom created an oversupply, with no end in sight.”

“It is not just small units affected, either. A big three-bedroom pad in South Brisbane is now on the market for $799,000, which is what it was sold for brand new 10 years ago. A luxury three-bedroom unit at Toowong that would have snared up to $950,000 at sale two years ago has lost about $100,000 in value because of the soft market, according to its seller. Units in Kelvin Grove’s Urban Village that were valued at $450,000 two years ago are now going for $399,000. Agents in those areas are ’submitting all offers’ and taking buyers’ low bids very seriously.”

“National Property Research Company director Matthew Gross said buyers had done their sums in this oversupplied market, and they were being cheeky. ‘I think buyers have always been cheeky but now they are allowed to be cheeky,’ he said. Coronis Agent Gerard Hawes said the investor market dried up in 2017 due to the crackdown on foreign investors. ‘For those people looking for decent market value, our foreign investors did tend to push the values up on that property,’ Mr Hawes said. ‘So we have seen a bit of kickback of around 10 per cent across the board.’”

The Courier Mail. “Forget apartments, Brisbane is about to be swamped with a different type of attached dwelling — prompting fresh oversupply fears. As the inner-city unit sector flounders, industry experts say developers are turning their attention to townhouses, with a new wave of residential projects set to saturate the market in 2018. New research by PRDNationwide reveals the number of townhouses in greater Brisbane is set to surge by nearly 250 per cent this year, with construction scheduled to start on more than 5400 new townhouses. In comparison, there is set to be a 170 per cent increase in the number of new apartments predicted to hit the market this year.”

“Real Estate Buyers Association of Australia Queensland representative Zoran Solano predicts Brisbane is facing a townhouse glut over the next two to three years. Mr Solano, who is a buyer’s agent with Hot Property Buyers Agency, said he had been dealing first-hand with many developers who had been snapping up sites around the city for townhouse developments. ‘We’ve seen an unprecedented amount of apartment settlements in recent years, so it’s getting harder and harder for developers to sell that product,’ he said.”

“Mr Solano said townhouse investors should be cautious in the current market, with some of his clients having to pay the difference between the purchase price and the valuation of their townhouse. ‘These properties are being sold at overinflated prices and then not valuing up to contract price,’ he said.”

From the Daily Telegraph. “Four Sydney suburbs have topped a list of the most risky areas for home seekers to purchase new properties off the plan. The research examined areas under a number of criteria including where housing supply was tracking well above demand and pushing down prices. This, in turn, was putting recent buyers at risk of paying down mortgages worth more than the value of their homes, the RiskWise Top 100 Most Risky Suburb report said.”

“Inner Sydney suburb Zetland was ranked the riskiest suburb in Sydney to buy a unit off the plan, according to the report. The suburb and neighbouring Waterloo have 5000-plus new units in the pipeline. With banks releasing their own blacklists of oversupplied markets, many lenders would require higher deposits as security for off the plan buyers who purchased in higher risk suburbs, the group added.”

“‘Lenders understand that oversupplied suburbs carry a greater degree of risk,’ RiskWise said. ‘Unlike a straightforward property handover, off the plan investors must be able to attain finance approval after construction is complete, and if the market has sunk during the build period, they are fronting the mortgage on an overvalued property. Additionally, off the plan dwellings are typically marketed to investors, and when many — sometimes hundreds — of identical dwellings come online simultaneously, it can be a race to the bottom as investors drop rents to lure in a tenant.’”

From the Australian Financial Review. “Sellers are lowering prices on high rise inner-city apartments by up to 10 per cent, advisers are being offered $10,000 commissions to recommend apartment sales, builders are adding ‘free’ luxury fixtures and lenders are including new incentives – on top of record low rates – in a bid to revive flagging residential property markets, analysis of market offers reveals. Some off-the-plan apartments are being revalued by lenders before final settlement by up to 15 per cent lower than their original purchase price, causing credit problems for buyers before they finalise their deals, according to mortgage brokers.”

“Property groups, such as Kokoda Property, are offering mortgage brokers, financial advisers and accountants $10,000 bonus for every sale plus generous rebates on stamp duty and other incentives. For example, $1.5 million apartments in Ashwood, which is about 14 kilometres south-east of Melbourne, are being offered 3 per cent stamp duty and free blinds.”

“Steve Lusi, a director of Direct Property Group, said a lender crackdown on small apartments under 50 square meters is also slowing demand and reducing prices for developers and sellers. He said the asking price for an apartment in Melbourne’s inner-city South Bank is being reduced by 10 per cent from $315,000 to $285,000.”

From News.com.au. “Six years ago, Mark was talked into using his mum’s home as equity to buy his first house. Now, in the midst of a messy divorce, he’s going to have to sell his mum’s flat to give half the proceeds to his ex-wife. The Sydney father, who asked not to use his real name, said he felt ‘conned’ by the Aussie Home Loans broker into the highly convoluted process, which all these years later looks set to leave his mum homeless. The upshot of all this was the couple wound up with two mortgages totalling $880,000. “Ever since then I have been shaking my head thinking, ‘Why did we allow this to happen?’ We should be in debt for a family home [for] $650,000, not in debt $880,000.’”

“Mark said he just wanted ‘one house for me and my wife to build a family in,’ but now owned ‘two homes, owe a lot of money, and now I have to try and figure out what to do’”

“There was some good news, however. In 2014, the couple sold their Kogarah home to an apartment developer for $1.6 million. They used the money to buy a large home in Bundeena and pay off the Kogarah loan. Mark said when the Aussie Home Loans broker heard about the couple’s developer windfall, he began trying to ‘push me towards buying more homes so I could have a property portfolio.’”

“Housing market analyst Lindsay David from LF Economics said people needed to be aware of the risks when involving a parent’s home in the purchase of a property. ‘Marital issues, the loss of a job, more often than not it’s at those times, the worst possible time, when people have to start to consider how to unlock themselves out of the financial risks they’ve acquired,’ he said. ‘The majority of people just don’t have the cash to come up with a 20 per cent deposit, so we use unrealised capital gains that exist within a house like it’s a bank account. But you can’t just take a tile out of the land bank and pay it back to the bank.’”