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Cup Day Rate Rise a Big Mistake

Monday, 25th October 2010

Harry not happy about rate rise

Leading developer and Meriton boss, Harry Triguboff says it was a big mistake to lift rates again. He believes an already gutted development market will only suffer more.

"From what we can see, as interest rates go up banks are scared to lend to builders and developers," Mr Triguboff said. "That results in less construction and that in turn forces rents up," he said. Mr Triguboff believes there is the general assumption that if interest rates are high, so too are the repayments and the price of a home or unit will go down. "That might very well be the case where money is cheap and there is an oversupply of dwellings, but that is certainly not the case in Sydney," Mr Triguboff said. "As rents go up prospective purchasers are prepared to make higher repayments for a property because they have no alternative. Prices don't go down significantly but rents increase significantly and that is not what we want." he said. Mr Triguboff is far from pleased that the recent GFC all but gutted the local development industry. While Meriton continues to build, he has absolutely no desire to be the only developer still standing. "Australians need to have a home to live in whether they buy or rent. It is as simple as that," Mr Triguboff said. “It is going to take more than one development company to house this country. "By increasing the rates, you are strangling the development market. There will be no one left to build unless the banks start lending to developers again." According to Mr Triguboff there are any amount of sites with approvals that can be purchased, but they lie dormant. The reason is that banks will not lend. And also there is little or no profit for the developer, so why should they take the risk, particularly when they can earn 6.5% on their money risk-free? And with interest rates continuing to rise, so too will the term deposit rates, making entrepreneurial activity for those with capital even less attractive, and making it harder for those who require debt finance. "The few developments that we see are very often undertaken with foreign investment capital (particularly coming out of Asia), and many of the buyers are also from Asia,” Mr Triguboff said. "Now, if investors are scared away from our shores because of our high interest rates and our high dollar, there will be no more foreign-funded construction. "As I said before, the local development industry has already been gutted by the GFC and our banks. So there will simply be nobody left to build the homes that are needed for Australians to buy and rent," he said. "The simple answer is that interest rates must go down, so banks will once again lend to developers. And as the banks lend, more will be built, people will afford to buy, and rents will stop going up."

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Comment from Daniel797 on Saturday, 10th September 2016

Cup Day Rate Rise a Big Mistake which admited by the CEO. Due to increase the Rate he face big lost and now he is not happy to increase the rate. Now CEO with whole team of expert try to manag that lose and make a strategy to do it. I actually know about but we should read such article which help to away such mistakes in business.

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Comment from michaelmaloney on Wednesday, 30th March 2016

These days interest rates may be coming down, but it seems like it's going to be just as disastrous! Time to hunker down into storage and take cover while the financial markets go to ruins!

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