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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (15712)	1/2/2004 7:41:44 PM
From: Elroy Jetson	Respond to of 306849

These are the comments referred to in the article you posted. finance.news.com.au Banks in Australia and New Zealand are not covered by an FDIC like organization. No depositor has ever lost money as the Australian Reserve Bank has the power to declare banks insolvent and merge a weak bank with a stable bank, wiping out the bank shareholders. Banks would much prefer to cut-off property developers and would-be home buyers than suffer a ratings downgrade from Fitch or S&P. *** * * * * * * * * * * * *** The big banks defended their lending practices yesterday against claims by Australia's leading unit developer, Harry Triguboff, they would be responsible for the biggest residential property crisis in a decade. And contrary to Mr Triguboff's claims of rising defaults, the banks are reporting no rise in failure to meet loan terms. Mr Triguboff told The Australian this week he expected 30 per cent of units bought off the plan in Sydney, and coming up for settlement in the next six months, would be handed back to developers because of defaults. In Melbourne, where the supply of units was higher, the defaults rate could be much higher. But some bank executives were privately scathing of Mr Triguboff, saying he was attempting to shift the blame back on to the banks and not answering claims it was the developers that contributed to the glut in inner-city units. "It's not about the supply of credit but the amount of units they have built," said one senior banking source. But while prices were softening, the banks said there was no evidence that defaults on off-the-plan units were rising. "Our deliquencies across the housing portfolio, including investment properties, are at record lows," said a spokesman for Westpac. The National Australia Bank said there had been little change in default rates. "Our loan losses, including in the inner-city apartment market, continue to be extremely low and show no signs of increasing," a spokesman said. Mr Triguboff was also contradicted by some of Australia's biggest unit developers. David Devine, who is building Melbourne's largest unit tower, said he was confident there would be no defaults. Brendon Crotty, managing director of another big unit developer, Australand, said the industry was "stunned" by Mr Triguboff's comments, saying there was no indication defaults were on the rise. Mr Devine said he had taken deposits on all but 14 of the units in the $328 million Victoria Point complex, with 447 units and 105 serviced apartments due to be completed March 2006. But he agreed with Mr Triguboff that lending constraints by banks were making it tougher for investors. "If the banks were still lending like they did before there would be no problems," he said. The Queensland-based Mr Devine last year cancelled his proposed $225million The Georgian residential apartment project in the Brisbane CBD. But yesterday he said the Brisbane market remained strong because it was boosted by interstate and overseas migration. Queensland Premier Peter Beattie said he was confident Brisbane would not experience a unit bubble burst because of strong population growth. " Because of the ... 1000 a week moving from interstate, quite often what happens is that we don't follow the national trend," he said.

To: Les H who wrote (15712)	1/2/2004 8:05:34 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

Finally, the original story from cache. The link below may no longer work. theaustralian.news.com.au THE AUSTRALIAN -- 23 December 2003 Tycoon's unit default alert By Robert Gottliebsen, Geoff Elliott and Elizabeth Colman Sydney and Melbourne are about to experience their biggest residential property crisis in a decade with thousands of people forced to walk away from settling on off-the-plan unit purchases - and lose their deposits - because they can't raise the money. Australia's largest unit developer, Meriton's Harry Triguboff, estimates that on the basis of current experience about 30 per cent of the Sydney units purchased off the plan and coming up for settlement in the next six months will be handed back to developers. If Mr Triguboff is right about Sydney, then in Melbourne the default percentage will be much higher than 30 per cent. Mr Triguboff said it was a "bank-created problem which could become very serious". Default rates that high would cause big losses for both the buyers and developers, leading to much wider ramifications including a further fall in the overall real estate market, particularly in resort areas. The comments mark a sharp turnaround for Mr Triguboff, who told The Australian six months ago he would tell Treasurer Peter Costello, who had warned of a property market correction: "There is no oversupply - it's all bullshit." Developers such as Mr Triguboff say it was the banks' easy credit that played a big role in the large number of units that have been constructed and it is the banks who have pulled out the rug - exactly what happened in 1990. Some banks will lose heavily as a result of their dramatic switch. Warnings of the downturn in the housing market have been a feature of investment advice for at least 12 months, but they intensified late last month when the self-styled property guru Henry Kaye called in the receivers to some of his companies. But Mr Kaye's demise also came amid warnings last month from the banks about the pain in the property market and their own strategies to insulate themselves from the bubble bursting, namely by tightening up their finance to investors buying second and third investment apartments. Gail Kelly, the chief executive of one of Australia's biggest home lenders, St George, had warned the Reserve Bank about the damaging effect of further rises in interest rates. Ms Kelly said there had been a "a significant shock impact to the first rise" in rates. Since her comments there has been another rise of 0.25 percentage points to take the cash rates to 5.25 per cent. Standard variable mortgages have now ticked above 7 per cent, up from 6.5 per cent three months ago. Brisbane, Adelaide, Hobart and Perth markets are much stronger, but they won't escape the fallout. Mr Triguboff said that when people paid their 10 per cent deposits to secure their units they received clear indications from the banks that the units would be financed on settlement. But now the banks are not prepared to lend the same amount as they were when the contracts were taken out. So where firm lending contracts are not in place, buyers discover that they now need additional finance to complete their contract. Those who can't raise the money face a grim prospect of losing their deposit. Their unit will then be sold and the price might be ugly if all the non-settled units are sold together. Those with existing homes may settle their purchase contracts by taking out a higher home mortgage. Others could lose their homes.