A respected economic commentator has described Australia’s booming apartment market as one of the biggest economic threats currently faced by the country.
Speaking at an NAB event in Sydney last week, BRW founder Robert Gottliebsen said the ongoing construction of thousands of apartments in Australia, many of which have been purchased by foreign buyers, is something that needs to closely monitored in the coming years.
“If you asked me what I thought was the biggest threat to Australia internally in the next 12, 18 months or two years it’s that we’ve built a vast number of apartments that Asian, and mainly Chinese, investors have bought off the plan and paid 10%,” Gottliebsen said.
“In the next 12, 18 months or two years those apartments will be completed and they’ll have to pay the extra 90%. They had expected to pay 30%... and they had expected to bring the money out from China or borrow from our local banks,” he said.
While the issues of apartment oversupply and foreign buyers have constantly been in the headlines in recent times Gottliebsen said recent developments have increased the level of risk associated with the two.
“They’re having difficulty getting extra money out of China and our local banks are saying now we want lend to you or they’re making it very difficult,” he said.
“If they don’t go ahead with those apartment purchases, we’ll have great disturbances in the property market.
“It is one of the challenges that we need to monitor and watch. I’m not saying it’s going to be crisis, it may not be but it’s one of the danger points.”
Jon Ellis, founder and chief executive of Australian based business-to-business off the plan marketing firm Investorist, also said the finance restrictions in Australia and China do pose a risk to the market, however he believes foreign investors who are soon due to complete purchases will be able to do so.
“It’s important to note that two of the four major banks have made a definite statement regarding foreign purchases. We haven’t had all four and it’s also important to note on the banking front that there are minor banks and we do have building societies and other financial institutions [that foreign buyers can use],” Ellis said.
“In Australia the ability to access funds is still there and we say that remaining in the short to medium term,” he said.
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