Brisbane foreigner OTP apartment defaults at one in five: UBS
The Brisbane apartment market is seeing one in five foreign buyers fail to settle, according to investment bank UBS.
It comes as tighter capital controls are imposed in China.
UBS said default rates for top east coast developers remained low in light of residential price growth being strong for many of the buyers who purchased off the plan two to three years ago.
These buyers had a strong incentive to settle.
But the research highlighted the Brisbane market as where foreign buyers were not necessarily in the money.
The Brisbane apartment market has been the subject of recent warnings from the Reserve Bank after strong supply concentrated in inner city areas.
“The Brisbane apartment market is overbuilt in our view [with] residential prices largely tracking sideways for the last two years,” UBS analysts led by Kim Wright wrote.
“Resale prices are 10 per cent or more below purchase price and bank valuations are frequently below the initial purchase price.
“Poor quality projects are under significant pressure and we understand one in five foreign buyers aren’t settling, citing tightened capital controls.”
Listed developers Mirvac and Lendlease only had a small exposure to Brisbane apartment completions, UBS said, but flagged continued focus on the issue.
“We will be watching the market closely and also to provide an understanding of how foreign buyers will react if prices in Sydney and Melbourne also softened.”
More broadly, UBS said most Chinese consumers around the world had been financing their global property purchasers with cash or mortgages from Chinese banks, reducing concerns about settlement risk.
About a third of buyers paid cash using their savings and nearly three in 10 paid cash with help from family and friends.
Of the one-third of buyers who borrowed, 85 per cent used a Chinese bank rather than a local bank.
The research comes from a survey of 3,060 Chinese consumers that found an increasing trend in mainland Chinese ownership of global residential property.
The survey found around 14 per cent of properties purchased by Chinese consumers were bought for investment and left vacant, a figure that had fallen over the past six months.
Another 26 per cent of properties were used by their owners only part of the time, perhaps for holidays, business or to visit family.
“As much as 40 per cent of the overseas property owned by mainland Chinese may not be fully utilised,” UBS said.
“This may have ramifications for the vibrancy of the surrounding retail space and amenity of the area.”
Roughly a quarter of the purchasers live in their property full-time, while more than 40 per cent bought investment properties and rented them out.