Bank changes to lending criteria will lead to higher property prices: Geoff Baldwin
RE/MAX WA director Geoff Baldwin has criticised new bank changes to lending criteria for Survey Strata house and land contracts, saying that they will end up driving prices upwards and may kill off many current projects.
Explaining that the new changes require developers of survey strata projects to complete a project before funds are paid over by purchasers, resulting in higher holding costs, Baldwin notes that this results in additional stamp duty to the buyer and a higher purchase price.
“Whereas strata titled projects are required to be totally completed before the deal is settled, survey strata developments allow settlement on the land content and then graduated payments until completion, much the same as a conventional house and land package,” Baldwin explained.
“As an example, we are currently mid-way through selling a villa development in Perth’s southern suburbs with most of the purchasers having committed to graduated payments and the entire pricing structured around that model so all parties are now faced with the problems resulting from these sudden changes.”
The banks have made the changes due to fears that developers who do not complete a project will leave land isolated from a road or without services, which would in turn negatively affect them.
Baldwin, however, says that there are other solutions to this issue.
“One solution would be for the developer to demonstrate their capacity to complete the project without the benefit of graduated settlements ensuring that no buyer was at risk and that the bank’s funds were secure,” he said.
He also noted that a developer could be required to hold funds as a security bond for lenders.
