Apartment buyer kickbacks set to rise as credit crunch nears

first_imgInner-ring suburbs were definite targets for the credit crunch but high apartment supply was also exposing the middle ring. Picture: Jodie RichterBRISBANE apartment buyers are in the “boxseat” for kickbacks as a looming credit crunch sees developers warned to go all out to ensure contracts don’t fall over.This as a dozen Brisbane postcodes were named in a lender’s blacklist, which included bluechips like Hamilton, New Farm, South Brisbane and Brisbane City.Prominent corporate recovery firm Ferrier Hodgson warned that “crunch time looms” for the Brisbane apartment market, advising funding partners and developers to prepare for multiple scenarios.“With all the headwinds facing the residential apartment sector in Brisbane, we anticipate sales prices for new apartments will decline, as will sales volumes for off-the-plan apartments, with settlement risk being a significant concern,” Ferrier Hodgson’s new report on the Brisbane apartment sector said. Million dollar sales at record levels Fainga’a brothers sell Brisbane Home More from newsMould, age, not enough to stop 17 bidders fighting for this home2 hours agoBuyers ‘crazy’ not to take govt freebies, says 28-yr-old investor2 hours ago Get The Courier-Mail’s real estate news in your inbox FREE Inner-ring suburbs were definite targets for the crunch, but the contagion was expected to spread to the middle ring because of the high level of apartment supply going in.“While inner city areas such as Newstead and Fortitude Valley, West End and South Brisbane will face these pressures, we have heightened concerns for developers and financiers with exposure to middle ring suburban areas such as Albion, Nundah, Cannon Hill and Chermside where significant apartment projects are completing now and throughout the rest of 2017,” the report said.“Financiers exposed to the larger residential projects in this sector need to be prepared to work closely with developers where they have an exposure to mitigate the risk of loss.”Developers were going to great lengths to keep investors on side, drawing on an array of incentives to drive up tenants for newly finished buildings, including up to four months rent free to secure 12 month leases.“This is to fill vacancies during 2017 and into 2018 where rental guarantees have been offered to investors by developers, as part of their purchase.”In the arsenal developers have been advised to consider “monetary incentive to settle rather than default”, helping buyers obtain loans, finding alternate buyers early, giving buyers extra time to settle, looking at first and second mortgages and in worst case scenarios, terminating contracts and pursuing buyers for any shortfall.Lenders have responded by creating multiple classes of borrowers, with some of Brisbane’s most affluent suburbs on lending blacklists — where they would be forced to pay higher deposits and face more conservative apartment valuations.last_img read more

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Norway backs down over forcing market valuation for pension funds’ bonds

first_imgShe said the industry association had been working on the matter for a long time, and was pleased the ministry had listened to its arguments.“Managing guaranteed pension products in a low interest rate regime is very challenging, where the providers are forced to take very low risk. This proposal would make it even more difficult for customers to achieve a satisfactory return,” Kierulf Prytz said.A significant portion of bond investments and loans in the customer portfolios underlying guaranteed pension products in Norway, such as defined benefit plans and paid-up policies, are accounted for at amortised cost, the ministry said.Were investments valued according to the market instead, changes in market rates could lead to increased profits or deficits on customer assets because of changes in the value of the bonds, it said.“The access to amortised cost use for a significant proportion of investments in pension funds gives pension providers a buffer against changes in market rates,” the ministry added.In the consultation, the government department said it had asked stakeholders to comment on this proposal specifically, stressing that no change was not appropriate unless it could be adequately shown to be in the customer’s favour.“The hearing responses have different views, but a majority of replies do not support the proposal from the FSA,” the ministry stated.Those against the idea said it would weaken suppliers ‘ability to manage risk and so could reduce customers’ returns, it said.“It has also been pointed out that it may be unfortunate to make such a change in a situation with a great deal of uncertainty in the financial markets,” the ministry added.The ministry said it was still considering the other regulatory proposals contained in the consultation, whose deadline was 8 April.Looking for IPE’s latest magazine? Read the digital edition here. Norway’s Ministry of Finance announced today it is not going ahead with a proposal to stop pension providers from being able to account for investments in customer funds in bonds and other loans at so-called amortised cost – a plan which would have forced them to use market valuations instead.The proposal, which has been out for consultation since January as part of an inquiry into the regulations for guaranteed pension products, had come from the Norwegian FSA (Finanstilsynet) which argued that the change to ongoing market valuation would support “neutral transfer rules” and simplification.But opponents argued – among other things – that banning amortised cost accounting for the underlying fixed income investments would mean more risk for the providers and as a result of that, ultimately lower returns for pension savers.Stefi Kierulf Prytz, director of life and pensions at lobby group Finance Norway, said: “It is an important victory for pension savers.”last_img read more

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