Changes in the lending landscape have put the brakes on the off-the-plan market, but what's next for apartment investors? Do they need to strap in for a bumpy ride?
Jason Zhu, mortgage broker and founder of aofun.com.au, a property portal that runs a dedicated nominee sale platform for distressed off-the-plan properties, says despite some hurdles the long-term outlook for the off-the-plan market remains bullish.
“Because Australia is a good country with some of the most liveable cities in the world. This attracts a lot of migrants and means there will always be a need for housing,” he told Smart Property Investment.
“A lot of young people don't own a home yet, so there is always a demand there.”
But in the short term his outlook is more pessimistic.
“Over the last couple of years predominantly a lot of these off-the-plan properties are sold to overseas buyers,” he said.
“And the sudden lending freeze by the banks has meant many of these people have been caught out and are struggling to settle, hence they are pulling out of the market to resell.
“At the same time all the new ones that haven't been sold may find it difficult selling, because people overseas are concerned so they just put off that decision.”
But Mr Zhu did acknowledge that there are still some short-term gains to be had in the off-the-plan market.
“There is concern in the market, developers are more eager to sell, so if you are in the market you might have more chance to buy something at a discount now, compared to before.”
Mr Zhu’s sentiments echo those of BIS Shrapnel’s associate director of building forecasting, Kim Hawtrey, who said recently that investors who had bought off-the-plan may be in for some nasty surprises in the next 12 months, after borrowing becomes more expensive.
Speaking at the BIS Shrapnel Forecasting Conference earlier in the month, he said those with interest-only loans could be even more hard-hit.
“Settlements are already taking longer to finalise and we may start to see over the next 12 months projects being shelved and banks pulling back on loan commitments and a reduction in foreign interest in the market,” Mr Hawtrey said.