Buy now, pay in 5 years: Brisbane developer offers deferred settlement on units

Australian Financial Review Feb 28 2018 11:00 PM

Michael Bleby

A Brisbane developer backed by Johnny Kahlbetzer's business Jemalong is giving buyers five years – when credit curbs should have eased – to settle purchases of the 20 remaining apartments.

Reed Property Group is offering the handful of apartments left in the 228-unit Belise project in Brisbane's Bowen Hills on a deferred settlement basis out of recognition of the difficult financing environment for investors, director Richard Ash said.

Under the plan, buyers who pay a "reasonable" deposit – of $60,000 or more – can take possession of a unit and pay monthly lease fees – equivalent to rent – and settle only in five years, when the developer would hand over the title, Mr Ash said.

Reed, which is 45 per cent owned by Jemalong Property Group, the business of Mr Kahlbetzer – a son of Rich List agricultural investor John Kahlbetzer – has already paid back its debts on the project, which completed last year, but was changing its offer to meet the market, Mr Ash said.

"The world has changed," he said. "There is no doubt the availability of debt for home owner-occupiers and investors has changed. Purchasers will find it easier to refinance or get finance in five years' time."

Regulator-driven credit curbs for investors and a wash of new apartment supply in the Brisbane CBD and inner suburbs such as Bowen Hills and Fortitude Valley have cut prices and sent vacancy rates soaring.

Unit prices were likely to rise during the next five years, by which time buyers would be looking to secure finance, Mr Ash said.

"We think there may be some downside left but probably not a lot," he said. "We're very comfortable that in the next three to five years there is upside in those prices."

It was a natural progression to extend deferred settlement, a common practice in the property industry, to retail buyers and it could become more common, said Ric Peterson, another Reed director.

Under a campaign the group is running, it will also offer to sell the remaining units – with prices ranging from about $400,000 up to $1 million – unconditionally for cash at a lower price than those buying on a deferred basis, as well as subject to finance.

The deferred sales weren't a sign of distress on the part of the developer, Mr Peterson said.

"We'd prefer to sell," he said. "But we're not distressed by any stretch. We've paid back the bank."