The story of fast-declining Australian urban residential rents is going to spell the end for thousands and thousands of small time developers.
Big names, totems of property are going to tank.
In our second story today Banking Day reports on the 10 per cent plus plunge in Melbourne rents and the pandemonium in the rental market.
But the big story for banking is the fall over of developers of units, town-houses, medium density and high density towers and fortresses.
In modern finance, the breakdown in bank credit quality almost always centres on commercial property developers.
Some crooked players in property development are in cahoots with organised crime and allowing for their ‘see no evil’ allies in the banking system, it seems fair to say that organised crime is the biggest and one of the most successful businesses around.
And the entire banking system is overexposed to property development.
In its March 2021 Financial Stability Review, the Reserve Bank of Australia tells the same story in muted tones.
In Melbourne the vacancy rate is 6 per cent and in Sydney the vacancy rate is 5 per cent, both climbing fast.
“Rental conditions have also been weak,” the RBA wrote, “particularly in Melbourne and in the inner and middle suburbs of Sydney where vacancy rates have increased sharply and rents for units have fallen.
“The closure of Australia’s international borders is expected to cause population growth in 2021 to be around 1¼ percentage points lower than previously expected and has reduced demand for inner city rental housing by international students.
“A shift in preferences towards detached houses has also been weighing on demand for inner city apartments.”
Digressing from the Banking Day version, the RBA said near-term risks of oversupply – and therefore sharp price declines – “are mitigated by the considerably smaller volume of higher-density inner city apartments due for completion in 2021 relative to previous years.”
A trend reversing for the worst.