Apartment buyers left in debt as Aussie banks 'pull plug'

Martin Dunn, of estate agency City Sales, says thousands of apartment buyers could be left heavily in debt after Australian banks "pulled the plug" on the apartment market. Photo / File

Up to 5000 apartment buyers could be left tens of thousands of dollars in debt after borrowing deposits for unbuilt units they cannot get the remaining funds for.

Martin Dunn, of estate agency City Sales, said Australian banks had "pulled the plug" on the New Zealand apartment market and were refusing to give would-be buyers the remaining 90 per cent for their mortgage.

Dunn said this had occurred to "unsophisticated investors" who had purchased Auckland central apartments off the plans at property seminars, often "on the spot".

They had been granted loans to pay for their deposits but when they had gone back to their banks to seek the remaining money they had been turned down.

City Sales was attempting to sell off many of the apartments on behalf of the worried buyers.

"We have an alarming stop in the supply of new apartments in a market where we can't keep up with growth," he said.

"It's not appetite that's causing this to stop it's because banks are withdrawing all their funding from building them."

A lot of the investors had not been aware that the banks had withdrawn from supporting the apartment market.

"We're already getting a few alarmed what I call - without wanting to be unkind - unsophisticated investors who are saying to their banks, 'We've bought this apartment in Auckland and settlement's coming up in January, we're going to need the whole lot'. And the banks are saying, 'You must be joking'."

City Sales had resold about nine such apartments in the last month.

"It's a bit of a warning shot to people that things have just changed on a dime," he said

Most of these people would have paid $50,000-$70,0000 10 per cent deposit with the expectation the bank would provide the remaining 90 per cent.

"We've got a bit of a train smash coming up," Dunn said.