10-09-2015, 09:41 PM
- Sep 10 2015 at 3:30 PM
- Updated Sep 10 2015 at 6:27 PM
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[img=620x0]http://www.afr.com/content/dam/images/g/j/c/9/3/2/image.related.afrArticleLead.620x350.gjjevl.png/1441873671634.jpg[/img]Last hurrah for investors: Latest research indicates the sun is setting for apartments investors. Arsineh Houspian
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by Su-Lin Tan
The building boom that has helped drive the economy is going to start slowing next month because too many apartments are being built, according to business research company BIS Shrapnel.
There is still demand for houses but an excess of apartments will drive prices down and lead to fewer being built, BIS Shrapnel associate director Kim Hawtrey said.
"The important story here is apartments. To read the current cycle is to read the apartment cycle," he said.
"Detached houses will continue on being built. It's like the grandfather of housing. They will keep going on after the party finishes."
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The fall in new apartments will be bigger than the number of new houses being built, leading to an overall fall in the construction of new dwellings after September, BIS Shrapnel said.
The number of dwellings built in Queensland will drop in the last three months of the year, followed by Victoria and then NSW in the middle of 2016, it said.
The exception is Sydney, where the number of apartments built could increase until the later half of next year.
"Generally, prices are already falling in Perth, and in Adelaide. There is limited upside in Melbourne and Brisbane," Mr Hawtrey said. "Sydney will have price increases for another six months but after summer, the rate of increase will go sideways."
'LAST HURRAH FOR INVESTORS'
Fading interest from property investors is slowing demand for apartments. "They have gone from fear of missing out to fear of losing their shirts," Dr Hawtrey said. "It's the last hurrah for investors."
A clampdown of investor lending for property by the Australian Prudential Regulation Authority will be felt by mid 2016, BIS said.
AMP stopping lending to property investors in August. ING Bank is demanding a higher deposit from investors and some banks are asking for higher presales of apartments – up to 100 per cent – before it will lend to developers.
People who have paid deposits for apartments that haven't been built may not be able to get a loan when the money is due or may have to pay a higher interest rate than now, Dr Hawtrey said.
"People who buy new off-the-plan apartments might not have to settle for another two years but banks are slowing down their lending," he said. "They think they have an agreement with the banks but the cost of finance may go up or the funds may not be available."
"While it is a silver lining for owner occupiers – banks are cutting lending to them by 40 basis points – the ratio of owner-occupier loans to investor loans is starting to normalise."
The Sydney market continues to be the outlier in the the national property market. The city is short 75,000 houses and apartments.
"The Sydney market has a long way to go … even if interest rate increases, the boom-bust cycle in Sydney will continue until the deficiency goes away," BIS Shrapnel chief economist Frank Gelber said.
The national spring property selling season will not be as strong as last year, Dr Hawtrey said. "We are going to see less excitement," he said. "Price fatigue or indigestion has set in and the gap between housing prices and wages is becoming more stretched."