RBA signals heightened off-the-plan settlement risk

The scheduled apartment completions of Melbourne and Brisbane raises the risks of settlement failures, the Reserve Bank of Australia warned in its latest statement.

‘‘There are some concerns about the concentration of new supply in areas such as some parts of inner-city Melbourne and Brisbane,’’ the August statement on monetary policy advised.

‘‘Downward pressure on prices from large increases in supply relative to demand for apartments in some areas could increase the risk of off-the-plan purchases failing to settle.’’

The RBA’s latest comments on settlement risk come after May comments which down played the situation.

It was then that the RBA's head of financial stability, Luci Ellis, said she hadn't seen any settlement risks [issues] yet when addressing banks cutting back on their loan value ratios and taking a more conservative approach to valuing completed apartments. 

In April comments comments were made about high levels of new apartments pulling prices and rents lower.

While noting the housing market in the mining-dependent capitals, Perth and Darwin was already suffering a high vacancy rate and lower rents, the growing supply of apartments had so far had a minor effect on the eastern-state capitals, the RBA said in April.

‘‘Despite the substantial increase in supply in recent years, vacancy rates in Sydney, Melbourne and Brisbane have only risen a little, to be around their long-run average levels,’’ it said.

‘‘That said, rent inflation in these cities has been declining, and has also been a little weaker than suggested by its historical relationship with the vacancy rate.’’