Multi-residential projects worth billions of dollars are being canned as the apartment oversupply worsens and lenders pull back on exposure to the development sector, media reports suggest.
According to a report in the Australian Financial Review, which was also reported in The Daily Mail, almost $5 billion worth of deals fell through in a single week recently as developer Mirvac and Western Australia’s Metropolitan Redevelopment Authority terminated a $3 billion agreement for the delivery of 1,200 dwellings to be built within the Perth City Link precinct, Brookfield Multiplex ditched a contract to build Sydney’s tallest residential tower and reports emerged of uncertainty regarding PDS Australia’s proposed $1 billion redevelopment at 545 Queen Street in Brisbane.
According to the report, Urbis regional director Peter Hyland said investors were starting to pull back as the level of risk becomes more apparent.
“I think a lot of people are more cautious now and sensibly so,” Hyland is quoted as saying. “People are closely looking at who is carrying the risk. People are looking at how the market is slowing and they have to be prudent.”
The latest reports follow growing concerns that an increasing number of apartment transactions will be subject to purchasers failing to meet their obligations at settlement as major capital cities are swamped with more than 230,000 new apartment completions over the next two years.
Already, JP Morgan reckon that Australia has an oversupply in high-rise apartments to the tune of 70,000 – a figure the group suggests will rise further amid the anticipated surge in new stock coming onto the market.
Others forecasters agree. Economic Consulting First LF Economics, for example, warned recently that the Australian housing market was suffering from a ‘bubble’ with ‘undeniable similarities to countries such as Spain, the US, Denmark and the Netherlands which had experienced significant levels of downturn over recent periods.
The latest reports also come as financiers pull back on apartment lending.
Westpac recently ceased to lend to all foreign purchasers for apartment purchasers whilst FirstMac says it is restricting lending for apartments.