Backtracking banks crushed hundreds of Melbourne homebuyers’ new home dreams last year.
New research has revealed 2400 blocks of land — almost 40 per cent of the total stock on Melbourne’s land market — are up for sale for the second time, after their initial buyer had to abandon their new home build.
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RPM Real Estate Group researchers believe the majority are back up for grabs after a mix of first-home buyers, young families and investors had loan values slashed by banks who had changed their lending criteria in the 12-18 months it takes for most land in new estates to settle.
RPM’s head of communities Luke Kelly said it would have “probably affected first-home buyers more” due to their weaker financial position. And more buyers could soon face “difficult choices”.
“There are a number settling in the next six months who will find they can’t get as much from the bank today, or find it more difficult to get their loan,” Mr Kelly said.
Some would build smaller homes. Others would start paying a mortgage against a bare block and hope their home dream could be revived later.
“Or they put it back to the market,” he said.
Mortgage Choice chief executive Susan Mitchell said in the past year, lenders’ policies and criteria had changed “significantly”, leaving those with long-term settlement periods open to a “disappointing” but a financially safer result.
“And homebuyers should know that if they are buying a property where the settlement is longer than six months away, three months with many lenders, pre-approval is really of little or no value,” Ms Mitchell said.
RPM’s research shows the city’s western suburbs were hardest hit, accounting for 42 per cent of resales due to the higher volume of house and land packages being sold there.
About 1200 blocks had yet to settle, showing almost half the buyers knew their home dream was over before their piece of land even existed.
A small number of the buyers would have been speculating on price growth and never intending to build. Some others would have had changes in their personal circumstances forcing them to abandon their new home dream.
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Buyers today are unlikely to see such a dramatic shift in lending criteria.