The Urban Developer
AdvertiseEventsWebinarsUrbanity
Industry Excellence
Urban Leader
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
A one-day deep dive on office, retail, healthcare, childcare and alternative sectors
UPCOMING | COMMERCIAL REAL ESTATE SUMMIT
LEARN MOREDETAILS
On Demand

Fireside Chat | Inside GemLife With Adrian Puljich

Building Australia's Newest Airport: Multiplex

The Makers Of The Mondrian | Design, Vision And Delivery Behind One Of Australia’s Most Anticipated Luxury Hotels

Next Gen Now | How Emerging Developers Are Redefining The Game

View All >
Latest News
Office

Off-Market Newstead Site Deal Breaks Land Rate Record

Taryn Paris
2 Min
The Urban Developer Industrial and Logistics Summit 2025
Exclusive

Keeping the Lights On: Growing Pains Jeopardise Industrial Boom

Vanessa Croll
8 Min
Finance

Coposit Expands to WA with Linic Group Partnership

Partner Content
5 Min
Office

Historic Midland Workshops Site Listed for Sale

Lindsay Saunders
2 Min
View All >
Events
Summit

Commercial Real Estate Summit

Summit

Urban Leader Awards

One-Day Course

Property Development Masterclass Series

Lunch

Long Lunch Series

View All >
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
RetailDinah Lewis BoucherMon 18 Mar 19

Private Developers Facing Settlement Issues: UBS

TUD+ MEMBER CONTENT
22bfc228-5c88-4183-9439-dfd93610a6a4
SHARE
80
print
Print

While there are multiple factors that will continue to weigh on the property market, UBS has identified Australian house prices versus credit growth and settlement risk as its key issues.

With declining property prices and the banks' increased scrutiny on lending, UBS economist Carlos Cacho says valuations prior to settlement could drop by 10-to-20 per cent below the original off-the-plan purchase prices.

“What we’re seeing now is apartments are increasingly out of money,” Cacho said.

“If you speak to any private developer they will tell you there has been significant settlement issues at the moment.”

Related: Deteriorating Outlook Hits Developers in Residential, Retail Sectors

UBS analysts said Mirvac's Sydney Olympic Park (Pavilions by Mirvac, pictured) and Marrickville were "most at risk".


Earlier this year UBS said Mirvac's most at risk projects are in Sydney, such as Marrickville and Sydney Olympic Park which “appear already out of money with the Sydney apartment price index down 5 per cent since launch”.

St Leonards could also become an issue if apartment prices were to fall a further 5-10 per cent.

“If you look at the launches for Sydney Olympic Park and even St Leonards, we’re getting to the point where, if you’re already typically down 10 per cent when buying off the plan, in valuation we’re getting worried it could be (down) more like 20 per cent if you roll forward 20 months time when these apartments are due to settle,” Cacho said.

In January UBS said apartment prices were down 7 per cent in Sydney and 2 per cent in Melbourne, while lending to new housing was down 22 per cent from its peak.

Related: Foreign Buyer Slump Worsens Outlook For Housing

UBS


Historically bank valuations were probably not as important when the banks were not looking at your finances as closely, Cacho said.

“What’s happened to buyers now, when they come to settlement the bank valuation might come in 10-or-20 per cent below the contract price, and then the bank is also assessing buyers with more stringent expenses.”

As of the September quarter, there were 100,000 units under construction in Sydney and Melbourne alone, according to UBS.

“So it’s a significant chunk coming on and we expect completion this year,” Cacho said.

But by estimates of underlying demand, UBS doesn't expect the construction pipeline to flood the market with stock.

“While we’re overbuilding now for underlying demand we’re actually just making up for a prior period of under building, and so we don't think there will be a fundamental oversupply that’s going to hang around for a long period of time,” Cacho said.

“The risk is more in the near term for settlement.”

RetailResidentialAustraliaMelbournedo not useConstructionFinanceReal EstateConstructionSector
AUTHOR
Dinah Lewis Boucher
More articles by this author
TOP STORIES
The Urban Developer Industrial and Logistics Summit 2025
Exclusive

Keeping the Lights On: Growing Pains Jeopardise Industrial Boom

Vanessa Croll
8 Min
Exclusive

What’s Driving Pro-invest Push into ‘Underserved’ Micro-Apartments

Taryn Paris
6 Min
Sud-slingers are back in action in 2025, with the Sydney market recovering after years of disruption.
Exclusive

Sydney Pub Market Rebounds After Post-Covid Lows

Patrick Lau
5 Min
Gelephu Mindfulness City: Bhutan how a city of the future is planned
Exclusive

Bhutan’s Mindfulness Masterplan Resetting How Cities Work

Renee McKeown
8 Min
Long Bay Correctional hero
Exclusive

Time to Rethink: Fresh Bid to Unlock Prison’s Prime Site for Homes

Clare Burnett
7 Min
View All >
Article originally posted at: https://www.theurbandeveloper.com/articles/private-developers-to-face-settlement-issues-ubs