RBA sounds alarm over off-the-plan properties
The RBA sounds alarm over off-the-plan properties because of lenders minimizing their risk on this type of asset.
“The Reserve Bank of Australia has warned that settlement risk on apartments purchased off-the-plan may have increased as a direct result of the stricter criteria that banks are now applying to investor housing loans.
The RBA highlighted that risks in residential property development and other commercial property markets continue to build, noting that this area of their lending has been a key source of bank loan losses in the past.
“Risks to residential property developers appear to have increased over the past six months,” the central bank said.
“The large volume of apartment construction currently underway and planned has continued to grow, and the price of development sites has increased rapidly due to strong developer demand.”
The RBA noted that foreign developers have contributed to this dynamic, and are reportedly willing to pay more for development sites than many local developers.
“The risk of a downturn in apartment markets is greatest in the inner-city regions of Melbourne and Brisbane, which look susceptible to potential oversupply,” the RBA said.
“While investor demand appears strong at present, including from foreign investors, apartment markets in these areas already look soft, and future tenant demand, including from international students, is uncertain.”
The central bank highlighted that recent international student net arrivals were less than the Department of Immigration and Border Protection’s forecasts, and the department’s forecasts for coming years have been revised down significantly.” For the full article click here
At Buyer Solutions we always conduct a rigorous pre-purchase due diligence on every asset we buy. When buying off the plan, we take it to a whole new level. If you are thinking of buying off-the-plan please contact us. You need to protect yourself and get independent advice and representation.
For up to date information on what’s happening in real estate in Melbourne, contact Janet at jspencer@buyersolutions.com.au or 0418 101 146.
Buyers Advocate, Buyers Agent of the Year 2014, Buying property, Housing Market, Investment, Investment property, Overseas Buyers, State of the market
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