Australia’s richest man is reaping the benefits of an apartment undersupply as many developers struggle to secure finance and projects are abandoned.
Meriton group founder Harry Triguboff, who has built more than 70,000 apartments, says high house prices are driving demand for apartments from owner-occupiers and tenants, resulting in stronger than expected gains already his year.
“Today we are in a situation where the apartment supply this year is not, I’m afraid, likely to meet the demand and that can mean only one thing – buyer competition forcing prices higher,” Mr Triguboff said.
“Sadly, many mooted projects that were due to start by other developers have not and some of them never will start due to regulatory and financial restrictions,” he said.
Unless developers have plenty of equity and a strong book of solid pre-sales, the banks won’t bankroll them and sites will sit derelict, Mr Triguboff explained.
The Meriton founder said one of the main problems is the banks and other funders, under government pressure, have curbed lending to offshore buyers.
“Fortunately for Meriton, funding is not an issue and our delivery pipeline will continue as always – we’ve been around for a long time and we’re our own banker,” he said.
CoreLogic latest figures show Sydney house prices rose by 15.5 per cent in 2016 and by a further 2.7 per cent in January.
Last month Urban Taskforce chief executive Chris Johnson said that Sydneysiders had to accept that their future was in apartments rather than houses.
He said the supply of new apartments was not enough to meet the market, with an estimated 37,000 needed a year when only 31,000 were built last year.
Mr Triguboff said this was a 20-year average requirement.
“At our peak, we are still behind the average. The government, Greater Sydney Commission and councils must focus on housing supply and maximising density in established growth areas.
“Under-development of these growth areas will stagnate this land for 50 years or more before it can be redeveloped, which will only place pressure on suburban and employment areas to accommodate the shortfall in supply.”
Mr Triguboff said the rise in Sydney apartment prices stalled for a period last year when banks tightened up on lending, a measure which caused a glitch for Chinese buyers of Sydney apartments.
“We seem to have worked our way through that situation, offshore buyers are again very active, lending to investors is up, and we are pleased to see many more Australians buying apartments,” he said.
“There’s no doubt that the low interest rates, from two angles, are a big factor.
“For many owner-occupiers, the cost of money means buying is cheaper than renting.
“For investors, the return on renting out a new apartment is much better than depositing it with a bank.”
Meriton sales director James Sialepis said Meriton apartments have been selling “at a rapid rate”.
“From a sales perspective, I wish we had more stock to sell. Buyers are transitioning into new apartments because of the quality, design and amenity provided,” he said.
He added that the group expects to sell 2,000 apartments this year.
“That number could have been higher if developments were able to get approvals faster.”