Settlement risk warning from PPB Advisory

Settlement risk warning from PPB Advisory
Settlement risk warning from PPB Advisory

Receivers PPB Advisory are warning apartment developers to reduce their settlement risk.

Major developers are activating plans to deal with foreign buyers and local investors who may not be able to access funding levels from lenders they previously envisaged.

It follows on from banks who've introduced an APRA triggered lending crackdown.

"Developers need to understand and manage the risk of their purchasers' settlements," PPB Advisory's Garry McLean told The Australian Financial Review.

"They need to ask themselves some simple questions about the purchaser – can I locate them, where do they live, what is there capacity to settle, are they a cash buyer or will they be seeking finance, who is their financier?"

"A complete due diligence of their purchasers will assist developers to mitigate settlement risk in the residential developments nearing completion."

He said it had been a major concern with many developments across the eastern seaboard due to be completed in the next few months.

"Developers should be undertaking a complete review of their existing pre-sale purchasers to mitigate their settlement risk – it's too late to wait until settlement day and realise purchasers are unable to complete due to limited financing sources for investment units."

McLean suggested he didn't see the prospects as similar to the fallout on the Gold Coast market during the global financial crisis.

"This was a global meltdown," he said.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

APRA Settlement


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