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As Australia’s property market continues to soar, even unlivable houses are selling for millions.
Buyers are snapping up Sydney homes with crumbling walls, and bathrooms and kitchens stripped of fixtures, in an attempt to get a foot in the door of the red-hot market. Many buyers are even shelling out for derelict properties for the sole purpose of knocking them down and building anew, according to a Reuters report.
Last week, a ramshackle brick cottage in Sydney’s northwest was sold for $1.6 million, according to Reuters. The agent handling the transaction told the news service that the price was “much more than we were expecting.”
Photos of the home on the agent’s website showed torn carpets, tattered blinds and a filthy kitchen. McGrath sales agent Michael Dowling told Reuters that the buyers were “individuals who wanted to live in this part of Sydney and are looking to knock down the property and rebuild.”
The buyers were attracted to the property’s nearly 500 square metres of land, Dowling said.
“More supply is coming into the market, but there is still heaps of demand,” he said.
Earlier this month, in another popular Sydney suburb, an abandoned house with no water supply or power connection sold for $4.7 million.
Property agents said they expected sales to continue to soar. Australian home prices have spiked 10.6% from a year ago, spurred by record-low interest rates, government incentives and employment growth. In Sydney, the median home price rose about $1,200 per day last month, according to Reuters.
In this roaring market, buyers are willing to pay premium prices even for uninhabitable homes, according to Nerida Conisbee, chief economist at real estate agent Ray White.
“It’s more cost-effective to knock down and rebuild than renovate,” she told Reuters.
Conisbee said that in Sydney’s Northern Beaches, “low-quality homes close to the beach” will likely get snapped up for their land value alone.
“There is no shortage of people willing to buy,” she said. “We are seeing very high numbers of active bidders.”
The trend of buying derelict homes is also helping to drive a building boom, with building approvals for new homes reaching record highs, according to the newswire.
However, the surging market is starting to attract the attention of the Council of Financial Regulators, which said last week that it was seeing signs of increased risk-taking in mortgage lending by banks. However, the council said standards remained sound nationally.
The Australian Prudential Regulation Authority said that it had contacted banks seeking “assurances that they are proactively managing risks within their housing loan portfolios, and will maintain a strong focus on lending standards and lenders’ risk appetites.”
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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