Highrise Harry lobbies APRA to lower lending standards

By Leith van Onselen

For the fourth time this month, Robert Gottliebsen (“Gotti”) has sounded the alarm on behalf of his mate, “Highrise” Harry Triguboff, about the threat of an apartment bust. From The Australian:

Australia’s leading apartment owner and developer, Harry Triguboff, visited the Australian Prudential Regulation Authority and ­the Australian Securities & Investments Commission this week. The ­visits were unprecedented and ­reflect the deep concern Triguboff has with the looming potential crisis in sections of the Australian apartment market…

…The Chinese investors were told that if, on apartment completion, they could raise another 20 per cent to bring their equity to 30 per cent, the bank would then lend them a further 70 per cent, but this offer was subject to valuation of the apartment at the time of settlement and a security assessment of the buyer…

The big rise in supply has caused the Australian apartment market to slip…if buyers of off-the-plan apartments can’t raise the money that they counted on from the local Australian banks and/or in China, Triguboff estimates that apartment prices will fall by 20 per cent to 25 per cent…

…Triguboff wants APRA and ASIC to allow the banks to honour their undertakings to fund 70 per cent of the apartments even if those undertakings had escape clauses based on valuations and so on. If the loan undertakings are not honoured, it will not only cause an Australian downturn and lower apartment prices but severely damage the relationship between Chinese investors in Australia. It may take a generation before they return to our market.

According to Gotti, then, the Australian apartment market is a speculative bubble and, rather than allowing it to deflate, Australia’s regulators should allow the banks to lower lending standards and blow it even bigger?

Of course, the wiser thing to do would be for Australia’s financial regulators to tighten the macro-prudential screws further, allowing the RBA to cut rates, lowering the dollar, and providing a much needed boost to Australia’s tradeable economy. This should have been done four years ago, long before the dumb bubble was allowed to inflate to its current monsterous proportions, but it still needs to be done now.

It’s time for Highrise Harry to take some pain.

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Comments

  1. I don’t think MP would do anything. Isn’t the majority of these being bought by overseas owners who don’t use debt?

    It would help the locals though – but I doubt even they would try…

    HT is smart, he tried selling his Empire 12-18 months ago. Its no wonder he is at the top of the tree in the is field.

    UE – you need a big whale like Gotti has… get the inside gossip… not to compromise yourself, but getting what the best in the business have to say. There is merit in that.

    • ” Isn’t the majority of these being bought by overseas owners who don’t use debt?”

      From Gotti’s article:

      “On the off-the-plan buyers’ side, most of the Chinese buyers have had conversations with our local banks. While some may have been funded using Chinese banks, our local banks are the main source of funding for individuals finalising the purchase when the apartment is completed.

      The Chinese investors were told that if, on apartment completion, they could raise another 20 per cent to bring their equity to 30 per cent, the bank would then lend them a further 70 per cent, but this offer was subject to valuation of the apartment at the time of settlement and a security assessment of the buyer.”

      • Exactly. My prediction? Loans to foreign purchasers will be paid down very quickly. Money laundering anyone?

  2. stop the stoats

    Aren’t the valuation clauses put in by the banks for their own protection, is Gotti saying he wants APRA to force them to loan the money anyway?

  3. TailorTrashMEMBER

    Apartments down by 25% ……..get down by 75% and some of the priced out local kids might think about buying them …….but suspect at any price they are rubbish ……

    • Strange Economics

      Or worse fire traps –
      the cheap imported cladding is not firerated on apparently many highrises.
      Consumption economy at its best – build empty apartments, then knock them down , then build again.

    • Strata fees for these high rise apartments are also a killer. All those lifts and pools cost a bomb to maintain.

  4. Harry needs to put his money where his mouth is and vendor finance his buyers. What’s good for the goose is good for the gander.

      • Strange Economics

        I talked to a building manager. Many of the apartments are kept empty to keep prices and rents up by managing supply. The DeBeers model for diamonds works for apartments.

  5. Gotti needs a big gold star for this effort – most impressive.

    What a brilliant idea! Have the banks lend truckloads of money to foreign citizens to keep the value of their Australian foreign owned assets inflated.

    Oh – and have our banks borrow heaps from foreign wholesale markets with a taxpayer guarantee to support this mad plan.

    Truly shark jumping material.

    Business with its paws out for public money and guarantees yet again.

    If Gotti truly believes the apartment is about to crash he should be suggesting that all the unsold stock be sold at auction – locals only.

    That would make a nice contribution to getting affordable housing on to the market.

    Gotti seems to think that the purpose of ChAFTA was to guarantee the value of property punts in Australia.

    • +1 Excessive mortgage debt and grossly overpriced assets are the problem => Lower interest rates are the answer
      The cognitive dissonance just ruptured my eardrums

      • Jumping jack flash

        Lol it is hardly surprising.
        The key driver of the new economy is debt demand.

        The key driver for debt demand is property.

        Keep the debt flowing into property, that will keep the debt growing, and the economy going.

        If there’s any small hiccup such as, say, stagnant wages, reduced debt demand, etc, etc, lower the price of debt – lower interest rates.

    • Truly appalling stuff from rich old men that don’t live in dog-boxes in the sky, but seem to have no problem cramming young families into these tiny holes of hell.

      How much is enough? The endless endless greed of rich old men…

    • Indeed. The other bit was ” If the loan undertakings are not honoured, it will not only cause an Australian downturn and lower apartment prices”… Seems like win-win!

  6. ceteris paribus

    I hope APRA, ASIC and even the RBA get right onto the job for Harry. They need to understand who their boss is.

    • The gall of this greedy gent to waltz on in to the offices of APRA and ASIC and seek special treatment …

  7. Can someone file a FOI on this sh!t with APRA. How can a private citizen get to meet the supposedly “independent” APRA and try to influence them?

  8. This is good news indeed…except if you have invested in apartments…which would.make you a greedy investor and serves you right!

  9. I tell you, APRA is a political animal, entirely malleable. They will fall into line when the negative consequences of their actions become clear (i.e. higher unemployment and lower bank share prices). Developers are gunning for them, right now. Taking their political contacts to lunch, laying the ground work. APRA, like their political masters, will bow before big money.