The banks with money … the banks just make the rules.
More than 5500 apartments and townhouses were approved nationally in December – the highest monthly number in seven years.
It’s no wonder developers are moving quickly to satisfy demand because the 7th Annual Demographic International Housing Affordability Study has just found Australia to have the most intense housing stress of any nation in the world. 27 of the 32 urban housing markets in Australia have been rated ‘severely unaffordable’ with prices on average more than 6 times gross annual household income. The benchmark for affordability is three times this measure.
Sydney comes in at a massive 9.6 times the gross annual household income to make it the second most expensive city in the world for housing second only to Honk Kong (11.4) and just ahead of Vancouver (9.5).
Inevitability the market is turning to apartments over houses as the affordability gap widens. Last weeks RPData/Rismark study shows in Sydney the gap between house and unit prices is, not surprisingly, the highest in Australia at $144,000 at the median house and unit prices. Of course, this gap is much higher closer to the city where most want to live and work.
So we want more apartments, the developers know this and the local authorities are approving them in record numbers – but will they be built? The answer to this question rests with the banks, and my friends in development world say on current trends it’s not likely that many will get up.
Banks presently want 10 – 20% more presales than ever before they will consider financing a new block and the pre sales numbers aren’t as easy to fudge as they used to be. Overseas sales are being ignored in this count, as are multiple purchases and related party transactions. Jump through these hurdles and you might get to borrow some money, but it will be expensive and the approval time will be frustratingly slow.
So until the banks release the reigns, while some housing markets will plateau for a while for apartments we can expect demand to continue outstripping supply, rents and prices to increase and the gap between the price of apartments and houses to narrow.