Apartment owners trying to sell out of the now notorious Opal Tower block are being offered knock-down prices for their apartments, according to newspaper and online news reports.
And neighbouring blocks are suffering an Olympic-sized ripple effect as vendors are offered less than half the list value for their homes.
Meanwhile, developers are facing their own crisis of consumer confidence, with an increased threat of off-the-plan buyers choosing not to complete the deal as apartment values plummet.
And, according to this story in Domain, a 61 units in a block of 130 in Epping are to be sold off by receivers after the developer went bust.
Some off-the-plan purchasers could walk away from their deposits as they confront the very real possibility of having negative equity in their units which could be worth less that they’ve borrowed to pay for them.
According to this story in Domain, buyer interest is slow across Olympic Park with offers from some bargain-hunters of as little as half the units’ asking prices.
Meanwhile developer Ecove has seen enthusiasm wane at some of its other developments close to the Opal Tower.
Ecove still has 30 apartments for sale in the Opal Tower and 40 percent of units in the nearby Boomerang development are yet to be purchased.
Director Bassam Aflak told the SMH’s Domain that it would take time for sales in its projects to pick up again. “We don’t expect a return to normal selling until around May 2019,” he said
The general consensus among real estate agents in the area is that a slow market, due to other factors, has been exacerbated by the Opal Tower evacuations with some predatorial purchasers offering less than half the previous value of apartments in the block.
Meanwhile some of Australia’s biggest apartment developers are facing an increased risk of buyers failing to pay at settlement time because of the national property slump that has seen apartment prices falling 7 per cent in Sydney and 2 per cent in Melbourne.
According to market analysts quoted in this story in the Sydney Morning Herald, Mirvac, Lendlease and Stockland risk buyers who bought at the 2017 peak of the property cycle failing to settle when the apartments are completed.
In extreme cases, purchasers could find that the units are worth less than the amount they’d have to borrow to complete the deal, and may decide it’s more prudent to walk away from their deposit.
“We see Mirvac as most at risk followed by Lendlease and Stockland,” said UBS Investment Bank analysts Grant McCasker and James Druce.
Generally speaking, lending has dropped more than 20 per cent from its peak as the big four banks have raised standard variable interest rates and increased scrutiny of borrowers’ abilities to pay.
Mirvac, in particular, faces a challenge in coming years with more than a third of the group’s earnings coming from settlements in Sydney and Melbourne .
The most at-risk projects, the analysts claim, are in Sydney’s Marrickville and Olympic Park which “appear already out of the money” with apartment prices across the city having fallen five per cent since launch.
