Tougher lending rules pushing up apartment prices: Triguboff

Stalled apartment projects because of tougher lending conditions are pushing up prices of units again in Sydney, says Australia’s richest man Harry Triguboff.

“Less projects are going ahead,” Triguboff, founder of Australia’s largest apartment developer Meriton, told The Australian.

The issues around offshore and local buyers having difficulties settling apartments as Chinese authorities curbed capital outflows and Australian banks tightened lending criteria had not prevented a new wave of buyers — particularly from China — from signing contracts and ­settling their unit purchases, Triguboff said.

“The new buyers are finding other ways to fund the unit,” he said.

Meriton, which expects to build 3000 units this year, which grew its mortgage book last year for buyers of its apartments in the wake of tougher lending criteria by banks, said in the article in The Australian.

“This year, they are paying me back,” Triguboff said, noting buyers were able to get alternative funding.

Sydney’s apartment market would continue to flourish in 2017, he said despite threats of oversupply and chances of more regulatory intervention to squeeze investor lending.

Earlier this week, RBA assistant governor Michele Bullock said regulators were prepared to do more if the housing market poses risks to the economy.

“You can’t produce units with a magic wand,” Triguboff said, noting it could take years from gaining an approval for a project to apartment buyers moving in.

Unit rents had risen about 3-4 per cent over the past year, in a sign that demand remained strong, he said.

The monthly CoreLogic Hedonic Home Value Index reported a further rise in the value of capital city homes in February, led by Sydney where home values grew 2.6 percent over the month, with head researcher Tim Lawless saying “growth conditions have been rebounding since the middle of last year when, on two separate occasions, interest rates were cut, and investor demand commenced trending higher”.

Triguboff said as projects failed to find funding, new development would take a hit and rents would rise, worsening Sydney’s affordability.

“You can buy off the plan, but you can’t live in it for years, so rents will go up,” he said.