SYDNEY, June 23 (Reuters) – Sydney homes with crumbling walls, jagged ceilings and bathrooms and kitchens stripped of fixtures are tearing up for millions of people as shoppers try to sell out ” capture a share of the booming Australian real estate market.
Last week, an abandoned brick cottage in the city’s northwest sold for A $ 1.6 million ($ 1.20 million), a price the estate agent handling the deal called it “much higher than we expected”.
Photos on the estate agent’s website showed ripped rugs, tattered roller blinds and a kitchen covered in grime.
“(The buyers) are individuals who wanted to live in this part of Sydney and are looking to demolish the property and rebuild it,” McGrath’s sales agent Michael Dowling told Reuters.
Despite the condition of the house, they were drawn to the nearly 500 square meters (5,382 square feet) of land, he said.
“More and more offers are coming onto the market, but there is still a lot of demand.”
In another popular south-eastern Sydney suburb, an abandoned house with no water or electricity connection cost A $ 4.7 million this month.
Estate agents said they expected to see more such sales in Australia’s AU $ 8.3 trillion housing market. Nationwide home prices jumped 10.6% from a year ago on record lending rates, tax incentives and strong job growth.
In Sydney, median prices rose by around A $ 1,200 a day last month, with buyers willing to pay a premium for uninhabitable houses to be demolished and rebuilt.
“It is more profitable to demolish and rebuild than to renovate,” said Nerida Conisbee, chief economist of the Ray White real estate group.
Sydney’s North Beaches are another popular area where there are “shoddy houses near the beach” that can be bought for their real estate value, Conisbee said.
“There is no shortage of people willing to buy. We see a very high number of active bidders.
The purchases are helping to spur a construction boom, with approvals to build new homes at record levels.
The scum in the market is starting to worry the Australian Council of Financial Regulators which said last week that there were signs of increased risk-taking in mortgages by banks, although standards remain healthy at l nationwide.
The Australian Prudential Regulation Authority (APRA) said it wrote to banks asking for “assurance that they are proactively managing risks within their home loan portfolios and will continue to focus on standards lending and lenders’ risk appetite.
Conisbee said the threat of stricter prudential lending standards was a risk to the market.
“It’s a headwind as winter approaches, but we don’t expect more stringent regulations to come soon,” Conisbee said.
“Current demand is still largely driven by homeowners, not investors.”
($ 1 = AU $ 1.3300)
Reporting by Swati Pandey; Editing by Tom Hogue
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