Sunday 17 December 2017

Buyer incentives on the up in 'fractured' Australian market

Prospective home purchasers are being lured by special offers
Prospective home purchasers are being lured by special offers

Larry Schlesinger

Malaysian real estate giant Mulpha is offering an $80,000 furniture package to penthouse purchasers as a Citi report warned of "hairline fractures" emerging in the Australian apartment market. Mulpha, which owns landmark properties like Hayman Island resort on the Great Barrier Reef and the Sydney Intercontinental Hotel, is selling the last three penthouses in its Watermark at Norwest development in Sydney's Hills District fully furnished, joining the likes of Mirvac, Lendlease and MAB Corp who are all offering hefty incentives to entice buyers.

A new report by Citi analysts David Lloyd, Adrian Dark and Suraj Nebhani identified "hairline fractures" in the apartment market with apartment rebates now 10pc of the asking price on average.

"Feedback from our Australian Property Conference and mystery shopping highlight a clear change in the apartment market, particularly so in Perth, Brisbane and to a greater extent in Melbourne," the Citi authors said.

"A tier 1 developer is now offering a five percent 12-month rental guarantee plus stamp duty ($25,000) plus an $11,000 furniture package on a one-bedroom apartment with a $495,000 list price (prior to June 30), all up a 12pc rebate," they said.

The report noted the tougher lending environment with loan-to-value ratios moving from 80pc to 70pc, interest-only lending being "choked", foreign restrictions "tightened" and interest rates up 50 to 100 basis points "despite the Reserve Bank being on hold".

The authors also noted that stronger owner-occupier land and medium-density markets in Melbourne, Sydney and SE Queensland favoured Stockland's "landbank and product" versus Mirvac, which has a greater exposure to the high-rise apartment segment.

In Melbourne's Docklands, developer MAB Corp is offering apartment buyers at its Elm & Stone development the choice of a $20,000 furniture package or a five percent rental guarantee for two years, while Mirvac and Lendlease are offering tens of thousands of dollars in incentives, including stamp duty rebates, furniture packages and rental guarantees.

Off-the-plan consumer research carried out by REA Group, publisher of listings portal, found that 40pc of buyers are influenced by special offers. The research found that the developer paying their stamp duty (59pc) was the most popular offer, followed by offering free upgrades with purchases (53pc) and providing a rental guarantee (44pc).

(Financial Review)

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