Jason Zhu

Melbourne-based online property portal, aofun.com.au, has devised an innovative solution to allow property buyers – mainly from overseas – who have made down payments on off-the-plan properties the opportunity to on-sell their investment via nomination before settlement.

Aofun’s Nominee Sale Platform solution is a direct response to the growing number of buyers who may have difficulty settling on their off-the-plan property purchases. The online solution creates an open market platform that will allow them to reach out to a wide network of potential new property buyers.

Aofun founder and CEO Jason Zhu notes that many of these potential sellers are overseas investors who have been “caught out” by the major Australian banks’ decision to freeze lending to foreign investors.

“Many of these potential sellers would have bought an off-the-plan property in the past few years and now find the settlement date looming while they have little or no chance of securing finance.

“The Nominee Sale Platform on Aofun.com.au is designed to provide an open and transparent marketplace where sellers and buyers can trade freely.

“In some cases, astute investors will be able to pick up a bargain where the seller may be willing to forgo the full 10% deposit plus more. In particular, there is a real opportunity for first home buyers who may not have sufficient savings for their first home to register on the website and acquire their first home with the deposit paid.”

He says the portal also gives property developers another vehicle to on-sell their properties when the original buyers cannot settle, which was one of the inspirations for building this platform.

The concept of the online property portal is straightforward and simple to use. The original buyers, who are now sellers, can list their properties on the site and buyers can make an offer on and/or make further enquiries about listed lots. Buyers and sellers can then negotiate the final sale price on the property via the online portal. The sale will then proceed through all the normal legal processes.

Although in most instances these overseas buyers have already paid, on average, a 10 per cent deposit, there will be circumstances where they may be willing to sell below the original contract amount to avoid potential lawsuit from the property developer or receiving a bad credit rating. Zhu notes that these factors “may have negative implications for any future immigration application to Australia or investment in Australia”.

“The reality facing the market is that many of the overseas buyers of these properties, for various reasons, are not going to able to complete their purchases, leading to an oversupply that will inevitably place a sizable burden on the property and construction industries.”

According to the most recent figures from property information consultancy CoreLogic (which captures figures up to April 2016), in the next 12 months about 92,000 units will need to be settled, and over the next 24 months this number increases to a massive 231,129.

In the 12 months of April 2015 to March 2016, 96,185 units were contracted to be sold; but this was before the crackdown on lending by Australian banks began in earnest. At the same time, it’s become increasingly difficult for overseas investors, particularly mainland Chinese buyers, to get money out of their country to finalise the purchase of these properties due to new restrictions on transferring money out of China.

Zhu says the situation created could potentially be the property equivalent of the GFC. “Many overseas buyers either can’t get money out of their countries or won’t be able to get finance in Australia. Although there may be alternative forms of credit available, they come at a price, and many of these overseas buyers would rather cut their losses than risk further financial consequences.”

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