A third of off-the-plan apartments are selling for a loss in Australia’s biggest city.
Swiss investment bank UBS is so concerned about Sydney’s faltering property market it has released a new report highlighting bad news for unit and house owners.
Investors who borrowed to buy an off-the-plan apartment, under construction, are in for a rude shock, with 30 per cent of them in Sydney selling at a loss.
A third of off-the-plan apartments are selling for a loss in Australia’s biggest city (pictured is the new apartments under construction)
They were selling for less than the purchase price even before a record 229,000 apartment construction projects began in the current building cycle.
Until recently, investors in brand new Melbourne and Brisbane apartments were getting burnt as buyers of under-construction Sydney units were spared the hip-pocket pain.
Like American investment bank Morgan Stanley and real estate data group CoreLogic, the Union Bank of Switzerland is expecting Sydney and Melbourne house prices to dive by 15 per cent, from their peak in mid-2017.
‘We are concerned that without policy easing, the largest price fall in decades could break the ‘buy the dips’ mentality and belief that ‘house prices only ever go up’,’ it said in a report.
Like American investment bank Morgan Stanley and real estate data group CoreLogic, UBS is expecting Sydney (pictured are apartments in Sydney under construction) and Melbourne house prices to dive by 15 per cent
Australia’s worst property market downtown since the 1980s will see many borrowers forced into a dangerous financial calamity known as negative equity, where they owe more to the bank than their property is worth.
With interest rates already at a record low of 1.5 per cent, the Reserve Bank of Australia has suggested it is more likely to raise than cut the cash rate.
‘In these circumstances, members continued to agree that the next move in the cash rate was more likely to be an increase than a decrease,’ the central bank said in the minutes of its October meeting.
Since peaking in June 2017, Sydney house prices have plummeted by 7.6 per cent while median values in Melbourne have slumped by 4.5 per cent since November.
Until recently, Melbourne and Brisbane apartment investors were getting burnt as Sydney unit owners were spared the hip-pocket pain (pictured is a Core Logic graphic for the June quarter)
UBS predicted a 10 per cent peak-to-trough decline in most of Australia but an even more severe 15 per cent plunge in Sydney and Melbourne.
‘As the main driver of price falls is the ongoing reduction in borrowing capacity for the marginal buyer, we’ve become even more bearish on housing,’ it said.
Sydney and Melbourne house prices also peaked last year after the Australian Prudential Regulation Authority imposed stricter lending rules for investors.
The end of interest-only loans has also contributed to a slowdown in the housing market.
Since June 2017, Sydney house prices (western suburb houses pictured) have plummeted by 7.6 per cent while median values in Melbourne have slumped by 4.5 per cent since November