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zaph

Funding timebomb set for property investors

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Banks' attempts to cool the over-heating property market has created a potential funding time-bomb for thousands of investors who have committed to buy off-the-plan apartments but have yet to secure finance to fulfil their contracts.

Mortgage brokers estimate there are 90,000 apartments being constructed in Australia that have been sold off-the-plan but not yet settled. The purchasers of about 20 per cent of these, or 18,000, have paid a deposit of just 10 per cent of the full purchase price, according to analysis of statistics from CoreLogic RP Data.

Mortgage brokers and some property developers are concerned these investors could struggle to find finance for the remaining 90 per cent purchase price as banks are suddenly toughening up lending criteria for investors.  

"This is causing alarm across the industry," said Tim Brown, chief executive of the  Mortgage and Financing Association. 

 

"Many of these are first-time buyers who will not be able to fulfil their finance obligation under the contract and will lose their deposit as many of the banks will not finance any investment loan over 80 per cent and in some cases will not lend on investment at all," Mr Brown said. 

Bank are under pressure from the Australian Prudential Regulation Authority and the Reserve Bank of Australia to cool the amount  of investment activity that has heated up the property market. On Friday Commonwealth Bank of Australia followed ANZ Banking Group by lifting its standard variable interest rate for investor loans by 0.27 of a percentage point to 5.72 per cent. 

http://www.afr.com/news/funding-timebomb-set-for-property-investors-20150724-gijggm

 

 

If the flavour of this article is true there might be some bargains on new apartments in the next few years. However, I don't think it is. How many of these buyers have equity in other properties that they could stump up as security? 

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If the flavour of this article is true there might be some bargains on new apartments in the next few years. However, I don't think it is. How many of these buyers have equity in other properties that they could stump up as security? 

 

 

The foreign buyers will have either cash or OS funding arragements.

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It is just scaremongering to get the banks to reverse their actions. People, who buy off-the-plan, pay in cash and are therefore not affected by the tightening of investor credit.

Edited by sydney3000

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The foreign buyers will have either cash or OS funding arragements.

That too.

 

"The purchasers of about 20 per cent of these, or 18,000, have paid a deposit of just 10 per cent of the full purchase price, according to analysis of statistics from CoreLogic RP Data."

 

The figure surprises me. Who pays more than 10% deposit? It becomes an installment contract and drastically changes the contractual and statutory obligations. 

 

This article's smellier than the caviar on a flight to Albury. 

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It is just scaremongering to get the banks to reverse their actions. People, who buy off-the-plan, pay in cash and are therefore not affected by the tightening of investor credit.

Some do, a lot don't. Off the plan is sold to 'investors' on the no deposit, negative gearing, high depreciation, guaranteed rent, have your tenant pay the mortgage pitch. 

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