"It's been in the tea leaves," Andrew Spring, partner at Jirsch Sutherland, said of the stern headwinds, which he predicted will only intensify over the next two years nowHe said it is "inevitable" more large developers will collapse in the coming months, following a host of other marquee Aussie construction companies who have been unable to survive in the current market.
That fear, he said, could see end users pulling out of property deals, banks approving fewer mortgages and investors retreating in caution."For developments in the process of construction at the moment, if they've got pre-sales in place, what's the risk now of those pre-sales actually completing?" Spring said he'd heard an increasing number of stories of developers approaching buyers to ask for more cash so homes or apartments could be completed.
"At what point is there a tipping point where you say, 'Well, in actual fact, I can't make money anymore and I'm not going to complete on these projects'.Demand has pushed the cost of materials up, resulting in pre-negotiated contracts no longer making financial sense for some under-pressure developers.
"They have to take it back to the market, that puts excess supply in, and does that drive prices down as well?"
What do you think happens when excess deaths is going through the roof and people are leaving Australia in droves?
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