
Greenland expects buyers to settle 100% of purchases at its Lucent project this month
Chinese developer Greenland has commenced settlements of their first completed apartment project in Australia, the 211-unit Lucent in North Sydney, amid concerns Chinese apartment buyers would start defaulting on payments.
Informal controls on outbound capital in China have created waves of concerns among developers and property agents in Australia that Chinese buyers would be unable to find the cash to complete their purchases. Many would have put down only a 10 percent deposit two years ago when they committed to the purchases.
Now, many of these settlements are due, as the residential boom in Australia reaches the end of a three year cycle, roughly the time taken to complete apartment projects.
Mainland Capital Controls Put Pressure on Chinese Buyers
With a wave of purchases maturing amidst China’s crackdown on capital outflows, many third-tier or private lenders in Australia, Singapore and Malaysia have scrambled to line up rescue funding. Some other funds are offering to buy out stressed purchasers, according to a report in the Australian Financial Review.
These “rescue packages” come at a higher interest rates of between 7.5 per cent to 12 per cent, compared to the 4 to 5 percent set by local Australian banks currently, increasing the pressure on overseas buyers and raising risks of default in the market. Australian financial institutions began curbing mortgages to foreign home buyers earlier this year amid rising concern over defaults.
State-owned Greenland, has faced challenges in its expansion into the Australian market, including contaminated sites, balky contractors and cancelled projects. However, the Shanghai-based developer assured the Australian media that defaults would be rare at the Lucent. “We knew about these buyers last month, and we are assisting them with approvals by talking to their banks and brokers,” Mr Luo told the Australian Financial Review. “We have been communicating with our buyers for the last three months prior to settlement.”
Greenland Plans to Wrap Up Purchases This Month
Settlements last week and six residents have paid in full, with the developer predicting that 100 percent of the sold-out building would settle their purchases by the end of August. The company acknowledge, however, that 5 to 10 per cent of Lucent buyers were still awaiting funding approval from banks.
Some Australian agents also said settlement conditions were made out to be “worse than they were” – most foreign buyers were taking longer to pay rather than defaulting. “Sure, there will be some who will walk away, but in an expensive market such as Sydney, many will ‘do or die’ and find the money to settle,” Australian property agent Home789’s Walton Chu said.
Homes at the 211 unit project were priced from $406,000 for a studio, to $1.35 million for a three bedroom when it hit the market in 2014.
The units sold out two years ago in less than one day. Comparable homes on the market this month would be priced 20 percent above the values paid by purchasers at the Lucent, according to market estimates.
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