Melbourne apartment settlements holding up, data from financier MaxCap shows

06 Oct 11:00 AM
Michael Bleby
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Apartment settlements are holding up in one of the densest clusters of Melbourne CBD, figures from construction financier MaxCap show.

The financier's records of four buildings it funded in the north-western Elizabeth Street precinct constituting a total 1937 apartments, which it said equated to 40 per cent of total apartment stock to be delivered in the Melbourne CBD, Southbank and Docklands this calendar year, showed little sign of settlement difficulties, said MaxCap chief investment officer Brae Sokolski.

Across all four projects which were almost fully pre-sold, at least 65 per cent of apartments settled within the first two weeks of the settlements commencing, with the remainder of stock settling over the ensuing four-six weeks with minimal evidence of recession, Mr Sokolski said. At least half of the buyers were foreigners who required Foreign Investment Review Board approval to buy.

The figures suggested that even at a time of reluctance by local banks to lend to offshore buyers, and Chinese capital restrictions making it harder for people to get money out to complete transactions, buyers were finding ways to settle their purchases and this was a good sign for the ongoing market.

MaxCap chief investment officer Brae Sokolski in the new Melbourne office.

MaxCap chief investment officer Brae Sokolski in the new Melbourne office. Jesse Marlow

"In the most trying environment for settlements, they are still proving incredibly resilient," Mr Sokolski said. "The buyers from offshore are finding a way to ensure that they settle and they have investment in Australian real estate.

"These buyers are the ones with notionally the highest possible risk. They bought when the market was very different in terms of their ability to access equity from China or debt from Australia. The fact that they are settling when they were caught unawares augers very well for the future of the industry and the settlements moving forward."

Few problems

The four projects were Golden Age's Victoria One (160 stage-one units out of a planned total 643 apartments), Hengyi's Light House (627 apartments), ICD Property's EQ Tower (633 apartments) and Mammoth Empire's Empire Melbourne (487 apartments).

In the case of Light House, 98 per cent of all apartments had settled successfully within 60 days of calling for settlements, Mr Sokolski said.

 

Mr Sokolski said a random sample review of title searches showed that about 58 per cent of the apartments purchased across the four projects were funded by cash, while 33 per cent was through major Australian banks or lenders, and a further 9 per cent through alternate or overseas lenders.

Other developers say they are facing few settlement problems.

BPM head Jonathan Hallinan separately told the Financial Review that settlements of two projects in the past two months – the 40-unit Black Fold project in Brisbane and the 30-unit Light Edge project in Melbourne – had only seen two sales fail to settle.

"We've settled 70 in the last two months," Mr Hallinan said. "Over two projects, we've had two fall over. Those two were very quickly resold."

 

Separately, MaxCap recently closed $280 million worth of funding with two large US institutions for Hengyi's Swanston Central development in Melbourne's inner-northern suburb of Carlton. Swanston Central consists of 1048 apartments and is currently under construction.

 
Read more: http://www.afr.com/real-estate/melbourne-apartment-settlements-holding-up-data-from-financier-maxcap-shows-20171003-gytvdn#ixzz4uhHqf5Rj