The announcement of easing COVID-19 restrictions saw an increase in loan applications at GPS.
It is becoming apparent that the banks have further reduced their appetite for residential development lending.
Most other lenders are experiencing varying levels of liquidity issues. They have taken actions ranging from reducing their appetite for new loans, through to withdrawing offers. I have seen, in some instances, lenders unable to fund progress draws.
I recently received a call from a very concerned builder who has built many projects funded by GPS. One of his projects had stalled. The lender appeared to have run out of money.
Loyalty is important at GPS. We put the loan for this project to the top of our pile and were able to take over the funding in a timely manner, limiting his losses.
I have received several other applications for funding for part completed projects. This is a troubling, but not unexpected, development in the residential construction lending market.
I have previously written about how the cheapest finance is not necessarily the most cost effective, and what happens when a new cohort of lenders hit their first real test.
At GPS it is mostly business as usual. We have an established, long serving and loyal direct investor base. As far as I see, the only restriction will come from a potential increase in the time it takes to sell completed units and townhouses. This will have some impact on our velocity of lending.
We remain open to consider new applications for finance. Please give me a call.
Richard Woodhead – 0427 574 246
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