04/09/2016
New apartments back in favour as ’s market gears up for spring, but still a hurdle for foreign buyers:
The strong demand for new dwellings in Sydney in the lead-up to spring has developers rushing projects to market to take advantage of the influx of buyers.
Earlier in the year sales of new apartments had slumped, especially as a result of tighter bank lending to foreign buyers and a clamp-down by the Chinese government on the amount of money leaving the country. This led to concern in the industry that the traditional strong spring selling season for off-the-plan projects might not materialise.
But an upturn in sales over the past month or so has convinced many developers to fast-track projects.
About 4300 new units are due to hit the market this spring, compared with 4500 for the same period last year and 4000 in 2014, figures from the developer lobby group, the Urban Development Institute of Australia NSW, show.
“We’re starting to notice that buyers are coming back to the market,” chief executive of UDIA NSW Stephen Albin said. “They had slowed down their activity for about four months….[but] there have been local buyers re-entering the market from what we’ve seen.”
Despite fears of an oversupply of apartments in many parts of the country, Sydney was the one capital where there was still an overall shortage, BIS Shrapnel associate director Kim Hawtrey said.
“There’s still a seller’s market because demand is outstripping supply, still, provided you’re in the right location and it depends on the quality of the product.”
Agent Sam Elbanna from CPM Realty said the latest interest rate cut and positive outlook for the wider economy were among the reasons new-apartment sales had bounced back in the past three or four weeks.
“We’re bringing on projects, one this weekend, one in a couple of weeks time, and then we’ve got two of over 100 units each that we’re going to launch before Christmas, because we see opportunity right now,” he said.
Some of Australia’s largest apartment builders are also among those bringing forward projects for spring.
The latest stage of Mirvac’s The Finery at Waterloo is one. “The level of demand for our projects suggests that spring has come early this year,” Mirvac’s head of residential John Carfi said.
“There may be a shortage on the market of established, older housing but we’re seeing a lot of demand instead for the new stock available.”
Another is Meriton’s largest project, Pagewood Green. The first stage of the 3000-apartment complex on the former British American To***co site at Pagewood is being brought forward by several weeks. This was in response to a growing appetite from owner-occupiers and tenants for “shiny new” and spacious apartments within easy reach of the city, Meriton’s founder Harry Triguboff said.
But there are some concerns foreign buyers might face difficulty when it comes time to settle due to bank restrictions on foreign investors, Lend Lease chief executive Steve McCann said at an Australia-Israel Chamber of Commerce on Wednesday.
In June, National Australia Bank joined three other big banks to stop lending to foreign buyers who had offshore incomes. This followed a move by Westpac and its subsidiaries, including St George, Bank SA and Bank of Melbourne, in April to stop all home-lending to non-residents and temporary visa holders.
Lend Lease is responsible for developing Barangaroo South, where there are about 900 apartments in total. And while Barangaroo’s commercial towers are 80 per cent leased, with an expected completion in the 2017 financial year, on the residential side there are “some towers to develop”.
Those who have bought off-the-plan will need to consider “alternatives” come settlement day if they had intended to rely on some of the major lenders, Mr McCann said.
Some will have cash to pay for the properties outright, while others would be unable to complete on the sales and the apartments would be re-sold.
Despite this, any “disaster scenarios [are] … unlikely to eventuate,” he said, noting that in tough markets at the “end of cycles” high-quality developments materially outperform.
And it’s still early days, though there is an increasing risk of apartments not able to settle Australia-wide, BIS Shrapnel senior manager residential Angie Zigomanis said. While there was a risk in Sydney, this was more of an issue in Melbourne and Brisbane, he said.
“I also understand that developers are giving buyers more time to find alternative finance,” Mr Zigomanis said.
“There are a number of players coming in to fill the breach, from other lenders to private equity. However, it is usually at low [loan to value ratios] and higher interest rates to help offset some of the risk.”
But foreign buyers have still been strong in St Leonards development The Landmark, which boasted the most expensive off-the-plan sale recently, with a two-storey penthouse snapped up two weeks ago for an undisclosed price in excess of $10.9 million.
David Johnson associate director with New Hope, the developer of The Landmark that has had about 50 per cent foreign buyers, was confident that sales would remain strong during spring, especially since foreign buyers had had time to get used to the rule changes.
“Auction rates are lifting and we are observing a similar thing with off-the-plan inquiries,” he said. “We see September and October as the golden months and are focusing on boosting our marketing over the next two months to ride that wave.”
Courtesy of Antony Lawes over at Domain
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