"They can't even talk about it – people are scared," developer says
In a strong warning, prominent billionaire and apartment tycoon Harry Triguboff has cautioned against another interest rate hike on Melbourne Cup Day.
Triguboff, the founder of Meriton Apartments, the nation's largest private builder of units, told The Australian that builders and developers are currently facing a significant number of bankruptcies, and borrowers simply cannot afford another rise in interest rates.
Triguboff's concerns are supported by recent data from the Australian Securities and Investments Commission, which reveals that construction-led business failures accounted for nearly one-third of all insolvencies in the September quarter. The figures show a 27% increase in business collapses compared to the previous quarter, The Australian reported.
One contributing factor to the current situation is the exit of several foreign companies that came to Australia to develop and build, only to suffer considerable financial losses.
“The build-to-rent companies from overseas have stopped coming,” Triguboff told The Australian. “The builders and developers never had such a high number of bankruptcies. So surely raising interest rates will not help production. If raising interest rates is even mentioned people get frightened and do not buy.”
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The billionaire emphasised the need for authorities to consider the number of units required to be built and the profit margin. Triguboff said that the finished housing product falls significantly short of the demand, leading to a growing imbalance between supply and demand.
Triguboff further expressed the urgent need for banks to extend lending to builders.
“They refuse to lend. They must find a way together with the government to provide finance,” he told The Australian. “Builders can’t pay 15% [interest rates] instead of 5% [interest rates].”
In addition, Triguboff urged state planning departments to shift their focus from refusing development applications to approving them. He argued that if there is no profit, there can be no building, and delays in approval processes only exacerbate the financial burden on builders.
Triguboff reiterated his stance that the Reserve Bank should avoid any discussion of raising interest rates.
“They can’t even talk about it; people are scared,” he told The Australian. “Even America is now saying that raising interest rates is in the past.”
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