New twist in property market has long term impact on Sydney

Very interesting article and commentary on what is actually going on with the markets in Sydney and Melbourne.

@melbournian u gonna love this.

http://www.theaustralian.com.au/bus...y/news-story/71e44170840853071cc66efb02651aec
[While the Melbourne apartment market is struggling with a settlement crisis, albeit reduced, outer suburban land developers have rarely seen such strong demand. Some of it is coming from those leaving Sydney to take advantage of the fact that blocks of land can be bought for around $250,000. Significant portions of the Indian community seem to be switching cities because they can enter the outer Melbourne market at a much lower price than Sydney. These are genuine buyers who are changing cities. But there is another and even more significant sector of the market that is playing the same game as unit purchasers did three years ago — they are paying a deposit (usually 10 per cent) on multiple blocks of land. And sometimes they duplicate the strategy as the developer moves from one stage to the next.]

May be a paid link, you will be able to get in via searching the title in google then clicking in from the link that comes out there.

 

Did reads bit of it - not sure if it is the right one but couldn't find the link to the indians. As said in the past, they moved a lot of stagnant suburbs that were just idle lying by.

i know they do buy a lot in the west of melbourne, tarneit, point cook, werribee, hoppers, wiliams landing, truganina. Even the north has sizable populations in reservoir, preston, thomastown, lalor. to be honest, haven't known that many coming from sydney.
Well i did purchase a couple of lots though not indian couple years ago. at that time i regreted as i exited a prime suburb though it is not that bad not though looking sell 1 house to buy 3 houses.

 

@melbournian

Ok full article here via google webcache, you'll find the part about the indians in paragraph five.

Unit crisis may bring city exodus

 

thanks ---




With some 15,000 Melbourne apartments due for settlement around June 30 — just over five weeks away — new twists are taking place in the property market which may also have long term implications our largest city, Sydney.

Meanwhile a new property speculative game is opening up in outer suburban Melbourne which threatens to be nearly as deadly as the old apartment game which led to the 15,000 problem settlements. And while this new game looks like it is mainly confined to Melbourne, it has national ramifications because inexperienced banks are in danger of being caught.

At the Australian Leadership Retreat on the Gold Coast over the weekend I learned that of the 15,000 vulnerable apartments, in the vicinity of two thirds — mainly the big developments — are owned by major Asian institutions or funded by big Chinese banks. Both these groups are taking a long view so developers are not under pressure and will receive their cash. That means rather than there being 15,000 apartments where settlement is about to trigger a developer crisis, the problem number is closer to 5,000. But in the smaller developments where the 5,000 are concentrated, there are deep problems because the Australian banks have lowered the amount they will lend to locals wanting to settle and the Chinese can’t get funding from either the local banks or extract money from China. We are looking at a $1 billion plus problem. Some of the money has been raised by the non banking finance which is emerging as an important linchpin of the society. But there will still be a substantial shortfall which will hit developers and their bankers.

One of the danger points in the apartment crisis is that many local and Chinese investors when buying off the plan, say, three years ago bought several units because all that was required on each unit was a 10 per cent deposit. The idea was that when settlement was due they would sell the surplus apartments at a profit, so reducing the cost of the remaining apartment. But the apartments have not risen in price so all the off=the=plan purchased apartments require full funding, which can’t be arranged from banks.

While the Melbourne apartment market is struggling with a settlement crisis, albeit reduced, outer suburban land developers have rarely seen such strong demand. Some of it is coming from those leaving Sydney to take advantage of the fact that blocks of land can be bought for around $250,000. Significant portions of the Indian community seem to be switching cities because they can enter the outer Melbourne market at a much lower price than Sydney. These are genuine buyers who are changing cities. But there is another and even more significant sector of the market that is playing the same game as unit purchasers did three years ago — they are paying a deposit (usually 10 per cent) on multiple blocks of land. And sometimes they duplicate the strategy as the developer moves from one stage to the next.

Under the rules of outer suburban development, a developer gets funding from the bank to constructs roads, sewerage etc once they have sold, say, 60 per cent of the development. But unwary developers are discovering that much of their recent 60 per cent quota of applicants comes from related parties — and sometimes the same cluster of buyers are present at various stages.

Everything will work well if the land rises in price but if, as happened with apartments, the land does not rise sufficiently in the short time frame then the buyers will not be able to settle on their multiple purchases. The developers I know are now vetting all those offering to pay deposits and sign up. And that detailed examination of prospective purchasers caused them to detect the Sydney exodus. It’s not big enough to worry the harbour city in the short term but in the US we are seeing many young people leave cities that have become too expensive.

 

@Kangabanga



interesting views - though it is incorrect - anyone who has been in the apartment unit market in Melbourne for OTP knows that they are minimal or basically no gains or negative gains upon settlement. It is different to Sydney where some ppl bought 1 mil and sold 1.3mil apartments in Chatswood etc. In Melbourne, it is different. I started out refurbishing inner city apartments for sale so 10 years ago so I know ppl who initially purchased OTP had values stagnant. also mid 2005/06 there was a big crash in apartment prices

As for playing for the land blocks (yes there are a lot of Indians - as mentioned 10 offers on the tables for my pt cook place was indian (I kid you not). To be honest, I monitor the pt cook areas very tightly - don't really see that many on-selling by Indians for empty blocks (as in 2nd hand). Also, you would have to on-sell it before it settles - as you would have to pay duty on the land, legals etc, so the assumption, same buyer buying multiple blocks may not necessarily work (they need to build as well within 2 years). As for me, I did buy multiple blocks but the land prices were stagnant when I bought and I bought them in cash so no loans and I'm not indian. I also haven't duplicated the strategy by moving to other stages as ard 2014-2015 (it did not really move at all). One thing different to the Chinese is that they go for the lower end markets blocks and funding is local not from overseas. I also have 20 indian tenants in other places. and I rocked up last week to find 10 cars across the blocks parked. Apparently're they doing uber after hours. Also one guy has 2-3 jobs (admin in the morning, delivery truck driver, cleaner, taxi driver ) You have to give it to them - they really very hard to get income. IT is vastly different to mainland commie Chinese (who take money from overseas). I do uberEATs a fair bit and every driver who delivers are indian.