Roger Montgomery

Hurricane repairs in the US may help offset a slump in the apartment market here

Recently, Australia’s richest man and its biggest apartment developer, the property billionaire Harry Triguboff, cited slowing foreign investor interest as a reason for his observation that “the slowdown in the apartment market is worsening”, adding the number of new apartments sold had dropped and prices had fallen about 10% over the past six months.

Separately, investment bank UBS reported the results of a survey of almost 1000 Australian mortgage holders who borrowed in the 12 months to August 2017, noting: “Our 2017 survey found factually accurate mortgage applications fell to just 67%. There are now about $500 billion in ‘liar loans’ on the banks’ books.”

Meanwhile, interest-only mortgages increased from around 35% of total originations in 2013 to a peak of 46% in June 2015. APRA’s decision to cap the proportion of new interest-only mortgages at 30% of total originations for each of the banks from July 1 this year means that in just 2½ years the loans originated in July 2015 (46% of which were interest-only) will need to be refinanced and many borrowers will be forced onto principle-and-interest mortgages with an associated increase in repayments of as much as 40% – even if interest rates don’t rise.

Finally, a slump in approvals in recent months suggests a slump in the near future for construction activity in Australia.

But having said all that, hurricanes Harvey and Irma could prove a boon for international builders and building supply companies because Texas and Florida account for 14% and 10% respectively of the total US market for housing approvals.