From the AFR:
Commonwealth Bank of Australia has tightened its lending to apartment developers because new capital requirements, and particularly the restrictions on lending to investors, increase the settlement risk at the end of the project.
The Australian Financial Review has learnt that over 10 finance negotiations between CBA and apartment developers have fallen over at very late stages in the process because CBA has changed its lending terms and required a higher level of loan coverage.
Prospective developers have been told that the bank now requires the percentage of pre-sold apartments must now equate to 100 per cent or more of the debt provided by the bank. It used to be about 80 per cent. The loan-to-value ratios have also apparently changed. The bank will only lend 75 per cent of the total development cost, down from 80 per cent.
Given the high foreign bid in new developments this is also tightening credit availability for them, and is a carbon copy of what happened after the Shanghai crash of 2008. Add this from BS:
Consolidated Pastoral Company chief Troy Setter issued a warning to Agriculture Minister Barnaby Joyce during this week’s Global Food Forum dinner in Melbourne that foreign capital was “walking away” from deals because of recent disturbing government decisions.
…“But that foreign capital has a choice (about where it invests) and, with a fair bit of confusion with FIRB, we are now seeing people we’ve been working closely with who have decided not to invest in Australia.
“There is no doubt whatsoever this issue with the house in Sydney has turned off some substantial-sized Chinese bidders, and there are other private investors who only have an opportune window of time to invest, who the delays with FIRB (approval process) have seen them walk away.”
Excellent for existing residential purchases, not so good on farm land. I have no issue with the latter if the investment is going to increase output.
