Chris Lamont of the Housing Industry Association says: “Financiers now expect pre-sales rates of 75% before extending construction finance, whereas this time last year, it would have been 50% or even 40%. The financial industry’s appetite for construction risk has definitely diminished.” The other big impact is home buyers delaying their decision to purchase new homes, making the developers’ pre-sales target of 75% more difficult.
So how should the property investor interpret this cycle of apartment construction boom followed by the shelving of projects? But for property investors I would instead focus on rising rents, the lower interest rate environment, the subsequent improvement in affordability and the increase in the first-home buyer’s grants. The vendors of apartments being sold for the second time were the original off-the-plan purchasers, typically first-time home buyers or out-of-town investors who find themselves with a reason to sell in two to three years, or even six months after taking possession.
