Many views have been floating around the property settlement issues witnessed by Australian banks these days. Bank of Queensland’s chairman, Roger Davis sometime back indicated the risks emanating from rises in property prices in Australia, with specific concerns over Brisbane and Melbourne amid signs of more buyers facing difficulties completing off-the-plan purchases. Overall, trend showed that Australian lenders have been ‘naturally cautious’ on residential property, pointing to settlement risk and high prices in coast cities. Brisbane and Melbourne have been said to witness the largest number of units to be completed over the next years. But banks have seen a reportedly growing number of buyers struggling to settle on time because they are unable to obtain sufficient finance. Bank valuations of properties are also below the price of what buyers have agreed to pay in their contracts. The settlement issue in Melbourne and Brisbane, is dampening the economic condition to some extent. It has been observed that the boom in high-rise construction was slowing down, with the number of approvals for high-rise units falling significantly in October to a two-year low. Overall building approvals fell about 13% in October as against the market expectation of about a slight rise. This is an indication that Australia’s high-rise is driven by dwelling construction boom which is under pressure now.
 
ANZ Bank’s chief executive, Mr Shayne Elliott said that the high-rise construction boom that is transforming the skylines of Sydney, Melbourne and Brisbane will probably leave parts of these cities with many apartments. There is a sharp fall in approvals for high-rise units and banks are taking cautious view on this part of the property market, due to the pockets of over-building.
 
On the other hand, a small pie of Australian property developers including JSK Property, which is the newest foreign property developers in Australia, have been reported to see the settlement and financing risks as triggered by tighter credit policies or foreigner surcharges on property purchases, to be short-termed only. There is a speculation that banks might ease the restrictions.
 
While it is noteworthy that Fitch has downgraded the outlook for the Australian banking sector to negative and says that tighter underwriting standards could increase settlement risk, affecting property development exposures; the ratings agency still believes that the banks are well-capitalised to manage rising risks. This is being similar to Moody’s recent comments on the banks.

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