Settlement risk fears for thousands of unit buyers in Brisbane

 A NEW report has warned that thousands of units set to be settled over the next 24 months face settlement risk.

There are 44,511 apartments set to come online in Brisbane in the next two years.
Analysts warn that those who pull out of contracts could still be sued by developers to make up any loss in value of the apartment.

The CoreLogic RPData New Settlement Risk Report warned tightening lending conditions and the large volume of new unit settlements over the next two years raised concerns over whether all ­payments would be able to proceed as planned.

“Mortgage lenders have recently tightened their lending criteria; subsequently some people who have committed to off-the-plan units may not be able to borrow as much as they could at the time of signing the contract,” it said.

The report warned that three of the four largest banks had already announced they would no longer lend to overseas home buyers, which could result in a larger number of contracts not going through to the settlement phase.

In Brisbane last year, 15,880 new units were sold. This year the figure is expected to rise to 16,652. Analysts were closely watching units that had now hit settlement dates, especially in inner-city locations around Brisbane.

“With so much stock coming online at once, there is an increasing concern as to whether settlement valuations will actually meet the contract price of these units,” CoreLogic RPData analysts warned.
It comes as EPS Property Search director Patrick Bright warned buyers that off-the-plan purchases were speculative investments, given settlement could be delayed by years.
“Anything that you buy with a delayed settlement is a risk and the longer the settlement, the greater that risk becomes,” he said.

“You’re punting on the fact that the market will go up. If it goes down and it’s worth less at completion than the price you paid, then, when you go to ­finance that property at settlement you’re in negative equity.
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“If you end up in this situation, it’s much harder to get the finance and if you can’t ­secure it, then you will lose your 10 per cent deposit.”

Source: The Courier Mail by Sophie Foster, News Corp Australia Network