Crunch time for Brisbane with 100 city apartments yet to settle

More than 100 apartments in a high-profile Brisbane development are yet to settle amid warnings for ­developers.

Developer Tim Gurner outside his $600m FV development in Brisbane. Picture: Lyndon Mechielsen

More than 100 apartments in a high-profile inner-city Brisbane development are yet to settle amid warnings it is “crunch time” for ­developers in the Queensland capital.

Some 20 per cent of the first tower of property developer Gurner’s 520-unit FV development are yet to settle, although the company maintains sales-to-date have allowed the $180 million in debt linked the project to be repaid in full.

The planned $600m twin tower development in the Brisbane apartment hotspot of Fortitude Valley is being closely watched as an indication of health for the local market, considered by many — including the Reserve Bank — to be oversupplied.

More than 6400 apartments in major developments were due for settlement this year in Brisbane’s inner city, according to research from Urbis, prompting concerns of falling valuations.

The central bank last week highlighted weak conditions in Brisbane’s apartment market, where an increase in supply has resulted in falling prices and no growth in rents.

The RBA said the “key risks” in the local financial system stemmed from household borrowing. Household debt has continued to climb amid record-low interest rates, recently touching a debt-to-income ratio of 194 per cent — one of the world’s highest. “Higher interest rates, or falls in income, could see some highly indebted households struggle to service their debt and so curtail their spending,” the RBA said.

RBA said it would launch “top-down stress tests” of the banking system, which would be carried out on top of the supervision from the Australian Prudential Regulation Authority.

Sunland Group executive chairman, Soheil Abedian, said four foreign buyers recently failed to settle their apartment purchases in the 150-unit Abian complex, arguably one of Brisbane’s most luxurious apartment towers.

All local buyers settled, but three offshore Chinese buyers and one Pacific Island buyer did not. Mr Abedian said he resold the four apartments at a premium to the initial purchase price of 10 per cent or more.

“What we are seeing is the Chinese coming from overseas are having difficulty because of the restriction of transfer of funds by the Chinese government,” Mr Abedian told The Australian.

However, local Chinese buyers had no problem settling, he added.

He said more than 80 per cent of buyers in the complex opposite Brisbane’s Botanical Gardens were owner-occupiers and the average price for the luxury apartments was more than $1 million each.

Even so, Gurner founder Tim Gurner declared Brisbane’s property fundamentals were strong and “negative whispers” about the market were “way too simplistic and alarmist” when quality apartments were settling well, generating good rents and achieving solid resales. “People have been discussing Brisbane’s property market like it’s the end of the world as we know it,” he said.

“However, the fundamentals are strong, and with rental yields high and price points low compared to other major Australian cities, I believe Brisbane’s quality apartment market has only just started to hit its straps.”

The company spent an additional $8m on amenity upgrades across the development during construction and has reported no contracts rescinded.

All of the 110 foreign buyers had settled their units “without issue” and more than 80 units were leased before the first settlement, Mr Gurner said.

Ferrier Hodgson Queensland property director Campbell Gordon said the weeks leading up to Christmas would be the potential settlement crunch for developers, which could add to their lending costs.

“That’s where the big exposure is,” he said. “That’s when there is more collateral damage — that’s when a lender steps in.

“If there is any pain it will be somewhat short and sharp. Leading up to Christmas certainly will be crunch time.”