Melbourne Land Defaults Only at 6 Per Cent, Says Wolfdene
One of Melbourne's largest private land developers, Wolfdene, has recorded a three-fold spike in housing lot defaults, but nowhere near the 20-25 per cent fallover rate cited recently by Financial Review Rich Lister Nigel Satterley.
Wolfdene on Monday reported a settlement rate of 94 per cent from in excess of 350 settlements with an end value of $107 million across its portfolio in the last three months.
The company, with a $2.5 billion pipeline of more than 8000 lots, said defaults had risen to 6 per cent from a figure closer to 1-2 per cent when lot prices surged 30 per cent in 2017.
Director Jonathan Atchison attributed the lower default rate to the developer requiring a higher minimum deposit than many of its competitors, making it harder for buyers to simply walk away.
"It's very hard for a buyer to walk away from a $30,000 deposit. But if you're only holding $5000 or even $10,000, more and more purchasers [especially speculators] will walk," Mr Atchison said.
Mr Satterley, whose Satterley Property Group has about 10 per cent of the Melbourne land market, this month attributed a surge he saw in defaults to speculators not being able to sell-on their contracts before settlement or buyers being unable to get finance.
Wolfdene managing director Michael Goldthorp said this was not Wolfdene's experience. The company's fall-over rate was "not out of whack" with comparable conditions in previous markets.
More than 100 of these settlements were at Wolfdene's flagship Brompton project, where 475 contracts worth a total of $147 million were exchanged in 2018.
"With all the signs of a softening market on the horizon, we made a strategic decision to maintain a higher minimum deposit requirement than many of our competitors," said Mr Goldthorp.
"Take Brompton, for example ... 85 per cent of all contracts signed at that development have been executed with 10 per cent deposits held in trust. The remaining 15 per cent are 5 per cent deals.
"We knew this approach had the potential to cost us sales in the short term with other developers looking to hold or increase their market share by dropping deposits to as low as $5000."
Despite the rise in defaults, some developers and home builders are still offering low deposits to lure buyers in a market where monthly sales rates have plummeted due to the spike in prices.
Among them, leading home builder Metricon is offering new homes to eligible first-home buyers with just a $5000 deposit in combination with its "Exclusive Savings Plan".