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The bites of the housing downturn as Sydney apartments line up to sell fire



As a result of the slowdown, apartment prices fell 7 percent in Sydney and 2 percent in Melbourne.

It also triggered a gloomy forecast of analysts that the country's largest developers – Mirvac, Lendlease and Stockland – face a higher risk of collapse of settlements and a blow to their profits due to their exposure to projects sold to buyers at the 2017 peak property cycle.

The developer of the project in Epping, consisting of 130 apartments, is a little-known outfit called London with links to a Chinese developer.

London sold 69 apartments in a project that was conceived as a “new standard for modern life” before Newpoint's recipients were involved. They are believed to have been appointed by an offshore bank based in China.

A group of happy homeowners in Epping received more than $ 26 million in the foamy real estate market in 2016, when Gondon began to merge several suburban homes along Carlingford and Cliff Rhodes streets to create a “super-lot” building site.

Loki Maher with his mom Fiona in front of their house on Cliff Road, Epping, New South Wales. They profited from the 2016 real estate boom by selling their home to the developer.

Loki Maher with his mom Fiona in front of their house on Cliff Road, Epping, New South Wales. They profited from the 2016 real estate boom by selling their home to the developer.Credit:Peter Braig

The group's only previous project in Australia was the Macquarie Residential Quarter in North Ryde.

Sales agents Colliers International and Newpoint declined to comment.

According to CoreLogic, the average unit prices in Epping fell by 2.26 percent over the year, averaging $ 820,000.

One-bedroom apartments on the Elysian Peninsula sold for up to $ 788,000, and two-bedroom apartments cost $ 1.08 million before the project was stopped.

1-5A Cliff Road, Epping New South Wales. The developer was unable to sell the combined 61 units in this place and on the next 6-10 Carlingford Road.

1-5A Cliff Road, Epping New South Wales. The developer was unable to sell the combined 61 units in this place and on the next 6-10 Carlingford Road. Credit:Domain

Lending by Australian banks fell by 22 percent from a peak, as the big four tightened up measures for investors, raising standard variable interest rates and speeding up the processing of borrower applications.

According to analysts, the largest players in the country face a growing risk that buyers will not pay during the settlement due to falling prices for apartments and land.

“We see Mirvak as the most at risk, followed by Landlease and Stockland,” said UBS analysts Grant McCusker and James Drus.

Apartment sales account for a significant share of Mirvac’s revenues, particularly over the next three financial years. In 2020, almost one-third of the group’s revenues will come from settlements in Sydney and Melbourne.

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Analysts say that the projects most at risk are in Sydney Marrikville and Olympic Park, which “already look out of money”, as the price index for apartments in Sydney has fallen by 5 percent since launch.

St. Leonards can also be a problem if prices fall another 5-10 percent.

"We are less concerned about the estimated risk of Landleza, given the price increase since the launch date of 2015-16," said Mr. McCusker and Mr. Drus.

Another major developer, Stockland, has minimal impact on the apartment market, but relies on significant revenues from the sale of land for new homes.

The number of buyers canceling land purchase contracts is currently small, but UBS warns that tightening credit conditions, lowering prices, encouraging and reducing deposits will increase the number of buyers experiencing difficulties.

There has been an increase in speculative land buyers trying to unload their purchase contracts at Gumtree and other sites, which increases the risks.

“We expect the calculations in the second half of Stockland to be disappointing, as the percentage of cancellation and the time of settlement will increase,” said UBS.

Real estate experts believe that there is more pain in this sector.

SQM Research real estate analyst Louis Christopher said that, despite recent falls, the real estate market in Sydney and Melbourne is still overvalued.

“This recession still has legs to run,” he said on Tuesday.

"Sydney and Melbourne are still highly overvalued, despite the fall in prices, and only a few months later elections will take place at which the negative situation will manifest itself, and banks are still very harsh in providing loans to the market."

“We think prices will decline,” he said.

The real estate editor at The Age and BusinessDay for theage.com.au, smh.com.au, watoday.com.au and brisbanetimes.com.au from Fairfax.

Carolyn Cummins is the commercial real estate editor for The Sydney Morning Herald.

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