We are starting to see glimpses of the light at the end of COVID-19 for property development. Chances of a complete shutdown of the building industry appear to be remote.
The Market
There remain questions as to delays in the supply of some materials, and from social distancing rules on building sites. The impact on sales rates and property values is also yet to be fully determined.
The South East Queensland market has so far demonstrated that it is quite robust. I expect this is due to the market not experiencing any substantial price growth in recent years and maintaining its affordability.
An increase to the First Homeowners’ Scheme as part of state government stimulus packages will assist. Let’s see how Master Builders and the CFMEU work together to apply pressure for this to occur.
Credit Squeeze
As expected, the banks have again pulled back from residential development lending.
Lenders who rely upon institutional funds, or who raise their monies through financial planners, appear to be facing liquidity issues. The ASIC recently wrote to responsible entities reminding us of our obligations and duties regarding liquidity.
Newer and smaller entrants to the lending market appear to be experiencing some nervous investors. This will all be more noticeable for lenders who don’t have a clean loan book.
If my above observations are correct, then it is likely that there will be a further credit squeeze for residential property development. Considering a potential slowing of sales rates, this credit squeeze may be a good thing. It will further reduce the supply of completed product.
GPS is Still Open for Business
As you would expect from a long-established lender with a direct investor base built over 25 years, GPS has a clean loan book and good liquidity. It is pretty much business as usual for us.
Our focus remains on projects with loan sizes between $3 -$20 million for first homeowner and investor product.
I have seen the enquiry rate pick up. I expect quite a few applications over the next couple of months from developers who have become frustrated with the banks changing the rules and causing delays.
GPS can lend with no pre-construction pre-sales and can offer flexible funding solutions that work for developers in this uncertain market.
Richard Woodhead – Managing Director
Comments are closed.