Most non-bank lenders are flush with cash, due to fallen deposit rates and confidence issues in other investment segments. Only a few appear to be generally entering the residential construction development market.
I stress the word ‘generally’. In the current market, where there are still tight credit conditions, borrowers need to be wary as to who they are dealing with, and to check the fine print for hidden fees. I know I keep banging on about this, but I continue to hear and see horror stories.
GPS recently looked at a project that was going to be crowd funded. It is now a derelict site at podium level. Another person I’ve spoken with recently had learnt the hard way about early repayment fees.
The big issue at the moment for lenders like GPS is getting loans settled.
For developers, profitability is an issue. Increasing build prices have not been covered by increased sale prices of the end product.
Conservative valuations are also contributing. Valuers work off historical data, which means they can’t factor in price growth, even though we are seeing an end to the period of oversupply.
A conservative valuation often leads to developers needing to inject more of their own capital into the project to make it work.
The time it takes to achieve development approvals, and amended development approvals, from local authorities and changing rules, do not assist.
Finally, I note the imminent changes in Brisbane City Council planning laws for car park ratios. These will make projects even less profitable.
GPS does not charge early repayment fees (as long as the loan exceeds six months) and we work closely with a trusted panel of valuers. We will settle a loan without pre-construction pre-sales, getting projects started sooner and saving developers time and money in the long run. It’s how GPS remains competitive in the current market.
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