In today’s show Greville Pabst from WBP Property Group takes a look at the Melbourne market with reports circulating that there are too many units.
Kevin: We’re finding that the Melbourne market today is a very, very interesting market. It’s classed as one of the hottest markets in Australia. But we’ve heard lots of things about an oversupply of units, so let’s get a bit of an update on that particular market. Greville Pabst from WBP Property Group joins me.
Greville, an interesting Melbourne market right now. What are you hearing about any oversupply of units and what’s the cautionary note about settlement of some of these off-the-plan units?
Greville: Look, Kevin, it is a very complex market with lots of different subsectors, but I think that the greatest risk that faces many buyers of off-the-plan apartments, particularly in Australia’s capital cities, is that the lending landscape has changed from the time that they signed the contract to when they come to settlement. Of course, that can be some 18 months down the track.
I think that is going to cause many buyers potentially to get into some trouble, given that lending is now a lot tougher and the deposits are larger. I really do caution buyers to perhaps go back to their financier and just have a look at those numbers again, because if they leave it too late, they may find that they may not be able to settle the property.
Kevin: Yes, the point you make is a very good one. Anyone who purchased off the plan, say, 12 months ago with a settlement coming up, they should recheck with their finance because, as you say, particularly with investors, deposits have changed and so too have the lending conditions, Greville.
Greville: Yes. Not only the lending conditions but a lot of banks that lent to investors have actually pulled out of the market. HSBC is one bank that has pulled out investment lending, and ANP now, as well. There are also limited options for investors to go to outside of the major four banks. That’s almost like a little tightening of the monetary supply, which is the double whammy.
We’re also noticing that the types of products that are popular in the market… When I’m talking about products, I’m talking about apartments or houses. The demand for apartments and units is starting to wane, and that’s reflected in their performance in the latest median house and unit prices.
Kevin: Of course, if in fact there is somewhat of an oversupply of units in the Melbourne market, that’s going to make that situation even worse, Greville.
Greville: Yes. The oversupply of apartments, particularly in Melbourne, potentially could be a problem because of that valuation settlement risk.
Kevin: Greville, the bottom line: make sure if you have bought off the plan, that you get back and check with your financier to make sure that you can settle.
Greville: Yes, definitely. Perhaps have a talk with the bank of mom and dad.
Kevin: You might have to! Greville Pabst from WBP Property Group.
Greville, thanks for your time.
Greville: Thanks, Kevin.