Prepare to lose enormous wealth: Triguboff

The Australian 12:00am September 11, 2017

Turi Condon

The slowdown in the apartment market is worsening and will have a severe impact on the economy if it is not arrested, according to the country’s biggest apartment builder, billionaire Harry Triguboff.

The number of new apartments sold had dropped and prices had fallen about 10 per cent over the past six months, the founder of Meriton Group told The Australian.

“The falling prices will have a big impact on the economy,” said Mr Triguboff, who called on the federal and state governments to review their policies on taxing foreign investors and to expand ­policies on accessing superannuation for housing.

China’s continued restrictions on capital flowing out of the country, the local banking crackdown limiting finance for investors and sluggish domestic wages growth had combined with government policies causing a perfect storm for apartment construction.

At the same time, Reserve Bank governor Philip Lowe last week said he was watching the Brisbane property market carefully, particularly given the pressure on prices from the large rise in the supply of new apartments in that city.

Forecaster BIS Oxford Economics expects that by 2019 ­national building starts for high- density (above four-storey) apartment buildings will have halved from last year’s peak and could drop further the following year.

Managing director Robert Mellor said the fall in housing construction would have a “significant negative” impact on economic growth. “The RBA and Treasury are being a bit optimistic on the dent to GDP growth. We will not see economic growth at 3 per cent,” Mr Mellor said.

While first-home buyers surged back into the housing market during July on the back of state government grants to reach their highest level in four years, Mr Triguboff said this would not replace the loss of offshore and local investors and would result in less long-term rental stock being built.

Mr Triguboff owns 8000 long- term rental and serviced apartments in Sydney, Brisbane and the Gold Coast.

Both the volume of apartment sales and prices were dropping as Sydney’s five-year housing boom cooled, but rents were still slowly rising, Mr Triguboff said.

The lack of wages growth, along with changing demographic trends where young ­people challenged by housing ­affordability were staying longer with their parents or were sharing, was also weighing on new construction, he noted.

“The big question is whether the government will allow prices and volumes to go down before they start helping,” Mr Triguboff said.

“Australians could lose an enormous amount of wealth.”

Encouraging people to move to capital cities other than Sydney and Melbourne would help ­affordability and national economic growth.

“People want to live in big cities where there is more opportunity, more variety, more fun,” Mr Triguboff said. But cities like Brisbane needed to attract more people to spur economic growth.

Despite the slowing market, Mr Triguboff recently sold 1000 units and another 1000 will settle in the next few months. He said buyers were well aware of local banking and Chinese government restrictions and defaults had returned to normal low levels.