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When there’s high-rise oversupply, the lending is tightened

I think readers of kopiandproperty.com would have noted that my property portfolio consists of ONLY high-rise units, mostly condos. Actually, I do know that this may sometimes be pretty risky. High-rise can reach over-supply situation while landed properties would be pretty safe in terms of over-supply probability. As per reported in domain.com.au, in Melbourne and Sydney, due to the probability of an oversupply for high-rise units, the banks have started to clamp down on lending to residential property developers. One major reason is also because many of these high-rise units were sold to foreigners.
According to Development Finance Experts founder Baxter Gamble, this new tightening is mostly focused on developments with a high percentage of potential foreign buyers. Actually, I am not so sure if the local Australians would prefer a high-rise unit over a typical landed property which is in abundance in the secondary market. Foreigners are not allowed to buy from the secondary market and thus these choices, most of the time cheaper is not available to them. According to Chief executive of business banking at Westpac, David Lindberg this tighter conditions is because banks and regulators trying to deliberately slow growth in the market over the last 12 to 18 months, after a boom period.
I think the banks and the regulators are thinking ahead which is positive for the market. No one would prefer fora bubble to burst instead. The reason why I say so is also because according to a UBS analysis of official figures, the number of multi-story apartments under construction in Sydney hit a record of more than 48,000 in March 2016. In case many do not know, Sydney’s population is 4.3 million (google) which is only slightly more than half that of Greater KL. In other words, many of these high-rise units were built because of foreign buyers.
These days, most of the new launches would be high-rise. Landed properties would be scarce because of affordability. Even building further away would only help prices to stay 20-30% below the above RM1 million price tags of hotspots such as PJ. Thus, to say that the prices are affordable, even when coupled with further distance is not very valid too. High-rise is the only option to drive affordability and this is why I think the market would continue to be vibrant. As it is, majority of all Malaysians would not suddenly become super rich. I think investing in a high-rise without overpaying for one is safe. I wish myself the best.
written on 30 July 2016
Next sugested article:  Buy to stay first, before buy to sell; safer

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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