Non-bank lenders are reining in their exposure to the hard-hit retail and office segments of the property market amid fears of increased loan defaults from the global pandemic.
Traditional banks may have eased some lending requirements, the hurdles remain high causing developers to seek cash from other non-bank sources.
Although the risk is higher, so are the returns and this has seen a wave of capital wash into the non-bank lending sector from all parts of the globe, including Saudi Arabia, Hong Kong, Japan and South Korea.
While Australia has maintained its safe haven status, the extent of the pandemic has even led many non-bank lenders to reassess their customer profile.
Earmarked as no-go areas for some lenders is the retail sector, which has felt the brunt of falling sales and mall closures, and office developments, which are under pressure as more people opt to work from home.
There are some exceptions with higher profile projects being given funding, but they are seen as more one-offs than the norm.
In Melbourne, Australasian lender and investment manager, MaxCap Group arranged funding for the $120 million “Park Ave” project in South Melbourne through one of its large institutional mandates.
MaxCap has been lender on large-scale construction funding throughout the pandemic committing about $1.5 billion since April, including a $170 million apartment block in Box Hill, Melbourne and a $90 million residential project known as “The Ambrose”, located in Milton, Queensland.
Brae Sokolski, co-founder MaxCap Group, said funds would be advanced to finance the development and construction costs of the mixed-use development at 39 Park Street, South Melbourne.
For non-bank lender Chifley Securities’ principal, Dominic Lambrinos, commercial office space, retail and high-density, high-tower residential developments are now “no-go” areas for his group as the economy rides out the impact of the pandemic.
Developers continue to be squeezed by the major banks with low loan-to-valuation ratios and other stringent conditions being placed on them.
Dominic Lambrinos, Chifley Securities
Chifley Securities, which has about 140 lenders as clients offering loans from $15 million to $50 million, says it has gone from looking at lending on a geographical basis to an asset class focus.
“We are seeing less competition in the market as players have exited and the major banks maintaining their higher hurdles for financing deals, opening the way for Chifley and other remaining non-banks to fill the gap,” Mr Lambrinos said.
“This has given Chifley the opportunity to select fewer, but higher quality deals in the areas of construction, development and land banking.”
Chifley is seeing long-tail growth in hotels and other hospitality operations, retirement villages, boutique residential, medical practices and boarding houses.
Mr Lambrinos said that activity in smaller residential and hotel developments across the eastern seaboard remained strong, but warned that greenfields developments were proving to be very difficult to finance.
“Developers continue to be squeezed by the major banks with low loan-to-valuation ratios and other stringent conditions being placed on them, while non-banks like Chifley are commercial in meeting the majors’ rates and placing fewer conditions on the loans,” Mr Lambrinos said.
In a recent survey by Stamford Capital, it also revealed that the non-banking sector continues to power on, increasing market share and underwriting developments with limited pre-sales.
Half of non-banks surveyed require no pre-sales at all, although a quarter plan to increase this in the next six to 12 months.
The Stamford Real Estate Debt Capital Markets Survey was conducted in February, 2020 and again in August, 2020 after the “first wave” of the global pandemic.
Stamford Capital associate director, Victoria, Barnaby Wilson, said non-banks continued to flourish in this market.
“Last year 34 per cent of non-banks in our survey required no pre-sales and this has jumped to 50 per cent this year – even with COVID’s impacts the non-banks continue to increase traction,” Mr Wilson said.
“It’s getting harder for large-scale developments to secure funding, with banks seeking significant levels of pre-sales.”
This article is republished from brisbanetimes.com under a Creative Commons license. Read the original article.
Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald
2020 saw 6,777 interest rate cuts across Australia’s home loan institutions
From 1 January to 31 December there were 6,777 cuts to home loans, with an average cut of -0.30%, according to Canstar’s database.
- 880 cuts to variable rates for owner occupiers, with an average cut of -0.21%
- 2,455 cuts to fixed rates for owner occupiers, with an average cut of -0.33%
- 764 cuts to variable rates for investors, with an average cut of -0.21%
- 2,678 cuts to fixed rates for investors, with an average cut of -0.32%
Over the same period there were 535 home loan rate increases, with an average increase of 0.20%.
On 1st January 2020 the average variable rate for owner occupiers paying principal and interest was 3.73% (80% LVR). Today that rate is 3.32% The lowest variable rate was 2.69% and it is now 1.99% (80% LVR) or 1.77% (60% LVR).
On the 1st January 2020 the average 3-year fixed rate for owner occupiers paying principal and interest was 3.15%. Today the average 3-year fixed rate is 2.30%. The lowest 3-year fixed rate was 2.69% and it is now 1.89%.
Savings interest rates
From 1 January to 31 December Canstar recorded:
- 529 cuts to savings, with an average cut of -0.18%
- 262 cuts to regular savings accounts, with an average cut of -0.19%
- 267 cuts to bonus savings accounts, with an average cut of -0.17%
On 1st January 2020 the average regular savings account rate was 1.12%. Today that rate is 0.43%. The maximum rate was 2.65% and it is now 1.75% (available for 4-months).
On 1st January 2020 the average bonus savings account rate was 1.47%, now just 0.75%. The maximum rate was 2.25% and it is now 1.35%.
Article Source: www.urban.com.au
Home-buyer confidence at an all-time high
More than two-thirds of respondents in a recent survey believe that the conditions are right to purchase a home – a level of confidence not seen since the onset of the pandemic.
Finder’s latest consumer sentiment survey, which involved a nationally representative sample of more than 20,300 respondents, found that 67% of Australians feel that now is a suitable time get on the property ladder, up from 42% last April.
This marked the first time that home-buying optimism has reached this level since the financial comparison site started tracking the metric in May 2019.
Confidence was highest in Adelaide, where 77% of those polled thought now is the right time to buy a home. This was followed by Melbourne’s 70%, Brisbane’s 69%, Perth’s 67%, and Sydney’s 59%. Numbers were not available for Canberra, Darwin, and Hobart.
Those expecting house prices in their areas to “significantly increase” also hit an all-time high of 19%, climbing from just 5% in September last year.
Meanwhile, respondents who anticipate property values to “somewhat increase” rose to 44% from a low of 18% back in April.
Graham Cooke, insights manager at Finder, said that the recent spike home-buyer optimism was a good indication of economic recovery.
“This rebound in buyer confidence is indicative of increased economic activity over the past few months, along with an optimistic outlook for 2021,” he said. “Not only did the Australian government do a better job than most at restricting the spread of COVID-19, but federal and state economic support measures helped prop up the property market.”
Cooke said that property prices in every capital city, expect for Melbourne, have reached a higher level compared to the same time last year, adding that he expected “this trajectory to continue,” especially with 86% of economists in a separate Finders survey predicting a full recovery of national house values this year.
However, Cooke advised prospective buyers to carefully consider the pros and cons “before taking the plunge in the current market.”
“Low interest rates and government assistance packages like the First Home Loan Deposit Scheme put buyers in a strong position. The potential removal of stamp duty in NSW will be another boon for buyers and may spread to other states,” he said. “If you’re thinking about dipping your toe in the market this year, make sure you have a strong credit history, and shop around before signing up for a home loan.”
Article Source: www.brokernews.com.au
50,000 investors in mortgage stress put their tenants in precarious position
There are 50,000 households that face high housing cost burdens themselves, following the pandemic, who also own a private investment property.
There are 956,000 households living in housing affordability stress (HAS) in Australia, according to a new AHURI report that looked into the impact of COVID-19, with Commonwealth rent assistance (CRA) reducing the number to 758,000.
The situation of the 50,000 was “cause for concern given that private renters have been disproportionately affected by the downturn,” the report noted after modelling from the University of Adelaide and Curtin University.
There is considerable potential for highly leveraged households owning an investment property, who are spending a higher proportion of their incomes on their own housing costs, to run into trouble meeting those costs and/or the servicing of their investment loan commitments, it noted.
“We estimate that there are around 37,500 mortgage home owners living in HAS who also own an investment property, and approximately 12,000 private renters in a similar position.”
It is estimated that the overall number of households living with HAS would have risen to 1,336,000 (from the 758,000 baseline) without the JobKeeper and JobSeeker interventions.
Investors in Mortgage Stress
The study found that the number of households living in a precarious situation is very high, and will likely remain high even after a partial recovery in 2021 and the withdrawal of much of the Australian Government’s income support measures.
Without an extension of the JobKeeper income support measures beyond March 2021, the number of households living in HAS is likely to increase significantly, the AHURI report concluded.
Households living with HAS and owning an investment property themselves are predicted to more than double.
The report noted JobKeeper and JobSeeker interventions reduced the incidence of housing affordability stress by a considerable amount: 861,000 households compared to 1.34 million without the intervention.
“As JobKeeper moves through its later phases, the predicted number of households in HAS is expected to gradually rise by a further 124,000; 73 percent of these households are private renters.”
article source: PropertyObserver.com.au
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