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Housing crisis as housing in Sydney coincides with the sale of fire



The slowdown has led to a fall in housing prices by 7 percent in Sydney and 2 percent in Melbourne.

It also fueled the skeptical forecast of analysts that the biggest investors in the country – Mirvac, Lendlease and Stockland – are faced with greater risk of collapsing and will hit their profits because of their exposure to projects sold to buyers at the 2017 peak of the real estate cycle.

The investor in charge of the 130-unit project in Epping is a little known clothing called Gondon with links to Chinese developers.

Gondon sold 69 apartments in the project, which were sold as "a new standard in modern life," before the Newpoint receivers were called. It is supposed to be set up by an offshore bank headquartered in China.

A group of happy homeowners in Epponia achieved more than $ 26 million in the sparkling real estate market in 2016 when Gondon began collecting more suburban houses near Carlingford and Cliff Roads to compile a "super-lot" development site.

Lochie Maher with my mom Fion in front of their home on Cliff Rd, Epping, NSW. They sold their house developer.

Lochie Maher with my mom Fion in front of their home on Cliff Rd, Epping, NSW. They sold their house developer.Credit:Peter Braig

The only previous project group in Australia was a residential block called Macquarie in North Ryde.

Sales agents Colliers International and Newpoint refused to comment.

The average price of Epingo's shares dropped by 2.26 percent over the year to an average $ 820,000, according to CoreLogic.

One-bedroom apartment in Elysee was sold for $ 788,000, and two bedrooms were $ 1.08 million before the project fell.

1-5A Cliff Road, Epping NSW. The investor could not sell a total of 61 units at this location and neighboring 6-10 Carlingford Road.

1-5A Cliff Road, Epping NSW. The investor could not sell a total of 61 units at this location and neighboring 6-10 Carlingford Road. Credit:Domain

Australian banks 'lending declined by 22 percent when compared to their peak when a large four tightened investors, raised standard variable interest rates, and boosted the control of borrowers' demands.

The biggest players in the country are faced with increased risk for customers who do not pay in settling due to falling housing and land prices, analysts say.

"We see Mirvac as the biggest risk, followed by Lendlease and Stockland," UBS analysts Grant McCasker and James Druce said.

Selling apartments makes a significant part of earnings for Mirvac, especially in the next three financial years. In 2020, almost a third of group revenue will come from settlements in Sydney and Melbourne.

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The highest-risk projects are in Sydney at Marrickville and the Olympic Park, which are "already emerging from the money," as the housing price index in Sydney has fallen by 5 percent since launch, analysts say.

St Leonards could also become a problem because prices fell by an additional 5 to 10 percent.

"We are less concerned about Lendle's settlement on price rises since the launch date of 2015 to 16," Mr. McCasker and Mr. Druce said.

Another big investor, Stockland, has minimal exposure to the apartment market, but faces significant land sales earnings for new homes.

The number of buyers who cancel land purchase contracts is currently low, but UBS warns that tightening of credit, falling prices, incentives, and lower deposits will increase the number of customers who are struggling.

There has been a documented rise in speculative land buyers trying to switch their purchase contracts to Gumtree and other sites, which increases the risk.

"We expect Stockland's second half of the settlement to be disappointed that the cancellation rates will increase and the settlement time will be extended," UBS said.

Property experts believe there is more pain for this sector.

According to SQM Research analysts Louise Christopher, despite recent downturns, the real estate market in Sydney and Melbourne is still overrated.

"This crisis still has a few more steps," he said on Tuesday.

"Sydney and Melbourne remain very overpriced despite falling prices, elections are only a few months away, and negative funds are in the game, and banks are still very draconian in terms of lending to the market."

"We think there will be more price cuts," he said.

Real Estate Reporter for Age and BusinessDay for Fairfax's theage.com.au, smh.com.au, watoday.com.au, and brisbanetimes.com.au.

Carolyn Cummins is the Commercial Property Editor for The Sydney Morning Herald.

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