The chief executive of large non-bank lender, Firstmac, says the market could be heading towards an off-the-plan settlement crisis.
Speaking to
Australian Broker, Firstmac CEO Kim Cannon said the biggest challenge facing the lending and property markets
“Are we in for a credit squeeze? I wonder, especially as there has been a lot of talk in recent weeks about the
RBA, using APRA and ASIC to slowdown the investment market, having a huge knock-on effect to off-the-plan sales.
“I believe there is going to be an off-the-plan crisis.
“We can see that already. We are already seeing groups who have heavily invested in marketing properties to Chinese investors trying to lock in funding lines because they will have a serious problem in about 12 to 18 months when a lot of these buildings come out of the ground and are ready to settle – is there going to be anybody there to settle the loans?”
Speaking to
Australian Broker earlier this week, Firstmac’s chief financial officer
confirmed the non-bank recently decided to pull-out of lending to these property development schemes – whereby a group develops, markets and sells off-the-plan properties, particularly to off-shore investors.
According to Cannon, the off-the-plan problem is amplified when you take into consideration the speculation of a slowing property market in 2016.
“Remembering, when you are doing an off-the-plan, you are not committed until the final valuations. Are the banks going to value, if the market is shut down?” Cannon told
Australian Broker.
“It is a settlement crisis, you may have gone off-the-plan and bought an apartment for $800,000. But with the market closing down, suddenly it is only worth $700,000.
“These are things where there a lot of balls in the air.”
