This time last year GPS stopped lending while we reviewed the apartment oversupply issue.
The view we formed was that:
During the course of 2016 we saw:
Stock levels have allowed purchasers to focus on completed apartments. The levels of already rented apartments, with overriding rental guarantees, has substantially increased. The question asked is “why tie yourself to a project which may not get financed, may have construction delays and may not be rentable, when you can start earning a return from the settlement date?”
My personal view is that the value of presales from a credit perspective has substantially decreased during the course of 2016. Presales achieved in the current market appear to have a higher settlement risk, than contracts entered into pre-November 2016.
You would have to be pretty gullible and full of oxygen to enter into a presale contract in the current market. There is adequate completed stock available and little prospect of capital growth in Brisbane apartments in the next twelve months.
GPS has always been an “old school” lender.
It is all about:
GPS will not lend in the inner Brisbane urbanisation areas. I continue to be concerned about this area due to the level of supply. I continue to believe that prices in that area are around 20% over the mark in order to cover the cost of marketing and unionised construction.
Australian resident purchasers, like my Self-Managed Super Fund, will boycott the area. We believe that prices are too high, yields are too low, and quite a bit of the product is cheaply built, which will increase maintenance costs over time. There will not be any capital growth in the foreseeable future due to the level of competition.
GPS will be sticking to lending in our traditional areas, in and around Brisbane, which are existing residential areas with good amenities and sound resale prices. We lend because we want to lend, not because we have to lend.