The head of a national real estate network has warned that “mums and dads” who paid deposits on multiple off-the-plan properties could be at risk if valuations fail to match prices.
Speaking to Mortgage Business, Century 21 Australia chairman Charles Tarbey warned of the increasing number of new properties “coming out of the ground” at a time when prices are beginning to moderate.
“They do run a risk. We talked about this very heavily last year. In some areas it can be quite a substantial risk,” Mr Tarbey said.
“In great strong capital cities, the risk is probably reduced, but the reality is there are more and more homes coming onto the market in terms of established homes as well as newer properties, and the demand for those properties is tapering off.”
“If that occurs then you start to get the more worrying concerns which are valuations meeting expectations of the contract price down the track.”
The CoreLogic – Moody’s Analytics Australian Forecast Home Value Index, released last month, found that property price growth is likely to slow across Australia over the coming years.
The cooling property market comes at a time when a record number of new properties are coming onto the market.
The report looked at the top 20 regions for expected unit settlements over the 24 months to December 2017.
Inner city Melbourne was at the top of the list, with 5,520 unit settlements expected in the six months to June this year, growing considerably to 38,137 unit settlements over the 24 months to December 2017.
Mr Tarbey said the last time the market was hit with an oversupply of new properties, a significant number of valuers were “taken to task” over their valuations.
“When in reality they were just working with where the market was,” he said.
“Then all of a sudden people get a bit frightened and concerned about settling. They’d rather just lose their deposit and walk away or find a way out than to go ahead with purchasing an investment property.”
Mr Tarbey said there will be people who have put deposits on two or three properties.
“They’re not major investors, they are mums and dads that are starting out. There will be a few of them, and they are going to have to sit there and question whether or not they can come up with the extra cash if the valuations don’t meet the contract price that the properties are sold at.
“That’s the greatest risk.”
[Related: Default crises looms for off-the-plan buyers]