With an influx of new apartment stocks expected over the next two years, property analysts fear that the Aussie apartment market is on the verge of collapsing. According to Development Finance Partners principal Baxter Gamble, the restrictions set by major banks on off-the-plan buyers could see a wave of apartment sales as purchasers find themselves unable to secure financing.

“An occasional inquiry from a stranded purchaser is now turning into a full-blown queue of apartment buyers who signed up off-the-plan in good faith only to be advised that they are unlikely to obtain a mortgage without first finding a much larger deposit,” Gamble told the Australian Financial Review.

Another reason for the imminent decline of the apartment market is dwindling demand from Chinese buyers because of tighter lending restrictions to foreign developers.

“Chinese demand is falling off because it’s getting harder to bring money out of China and there’s more stringent financing here, so they are going for loans here through local banks, and local banks are not lending as much to these people,” said Matrix Property director Andrew Antonas. According to him, bank valuations of new apartments were falling five to ten per cent below what buyers had paid.

A report from CoreLogic RP Data also forecasted that a massive increase in apartment stock could put settlements at risk. In Sydney, newly completed apartment blocks are still selling out. However, Melbourne developers claim that off-the-plan apartment sales are now starting to fall significantly. Hence, dwindling buyer appetite coupled with tighter lending restrictions could lead to serious trouble for apartment sellers.

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