Land prices coming back to earth as developers start discounting

Land prices coming back to earth as developers start discounting
Land prices coming back to earth as developers start discounting

The most disconcerting trend to come out of the Stockland downgrade announcement was Matthew Quinn’s observation that banks were not offering financing to their buyers.

He said house-and-land buyers assessed as qualified for financing by Stockland were often getting knocked back by banks.

"A lot of these leads are still in the system, with conversion taking longer and finance approvals taking longer," Quinn said.

''Often this is due to buyers going through the finance process and getting knocked back even where we assessed them as being able to get finance,'' he said.

Perhaps the key reason for the bank hesitation came elsewhere in the briefing, when Quinn noted Stockland residential lot sales were being affected by competitors cutting their prices.

Quinn said the cuts were between by between $50,000 and $70,000.

Quinn told analysts that while there was some price pressure in areas where direct local competitors had aggressively discounted prices, Stockland did not usually match price cuts and preferred to “ride out” the discounts.

But in a recent survey of 40 of the top 100 home builders, 72% of respondents said house-and-land buyers were having trouble obtaining finance.

Some 62% advised that it was getting worse or showing no change, according to the survey released by RBS Equities this month.

Buyers’ difficulties in obtaining finance were resulting in lost sales for 79% of the home builders that responded, and in delays for buying for 21%.

Consumer caution – which has been around since the GFC –  is now meeting resistance by way of financing challenges in the most affordable sector of housing.

It should, as I pointed out last week, be of increasing concern to state and federal government policymakers.

Have we heard much from the opposition on the issue?

But surely the lengthening absence of data indicating any housing construction recovery – and accompanying credit growth – must be weighing on Federal Treasurer Wayne Swan during his May budget preparations.

Bendigo and Adelaide Bank chairman Robert Johanson says the housing market succeeds because of economic prosperity rather than government intervention.

So while we await the prosperity sentiment, and any government intervention, it seems home builders are going to have to offer more than free air-conditioners or $5,000 barbecues to secure sales.

Maybe the astronomical price of land has to come back to earth a bit.


Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.


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