Market News - January to March 2017
The 2017 year got off to an interesting start, given the recent election results in USA, notwitstanding the various conjecturing on where the local economy is heading and the global market analysis about the effects Donald Trump might have on the Australian economy, so we moved into 2017 with a hightened level of interest.
Suffice to say, investment into local residential and commercial property markets, particuarly on the Eatern Seaboard, has not really slowed in any way after Christmas and even up until mid-March 2017 its still in sausage making mode, with the Big Four Banks, and a raft of 2nd Tier Residential Lenders, continuing to pump out new investment loans to SMSF's and would-be property speculators.
By comparison however, and on the construction lending front, its seems the Big Four have now finally 'all-but-pulled-out' of this finance sector, leaving a lot of experienced and reputable Property Developers scratching their heads about where funding for their next big project is coming from, and right now it would be fair to say that the construction loan market is in a bank induced, funding vacuum.
But Developer's should not dispair, as Viking can assist here, and we now encourage any struggling Developer to drop us a line, or give us a call, to discuss any current construction funding requirement despite the fact that you expected that your current banker would fund you, but now sadly, they really cannot assist.
In any event, the lack of bank support is really a blessing in disguise because when you call us, we will explain to you the multiple benefits of using a Non-bank Lender, instead a commercial bank to fund your next development project, and when you understand this we are sure that you will never want to talk to your bank again about anything other than a home loan loan or your credit card.
Market News - April to June 2017
During the three months leading up to the end of the 2017 Financial Year there were no major changes to the cash rate or the economy, or generally across private money lending policy, however we still noticed a further tightening of lending criteria at bank level.
Viking continued working on bringing together several potential preferred equity investors into several mid-range townhouse development deals as well as settling several smaller 'construction rescue' loans, one in particular, a second mortgage of only $200K to assist with the completion of an upmarket duplex pair in Broadbeach Waters. Incredibly were able to secure second mortgage funding at a rate below 16% per annum needless to say the client, a former Australian Test Cricketer, was delighted.
Another one of our new pro-active marketing initiatives also provided successful, that being our mail out program. Instead of sending out the same old nonsense that other commercial brokers send out, i.e. how good we are and how many deals we settled, we have decided now to only send out blanket emails when we have something of community interest to say and the response to several of our emails seeking equity injections for a couple of local South-East Queensland developments we've been working on has provided quite successful. (refer of Blog Pages for more info)
Market News - July to September 2017
Momentum in this quarter remained upbeat and we continued to see growth in the national, CBD / Metro property markets, including continuing growth, albeit slower growth, in Sydney and Melbourne. Hobart and Canberra were certainly stand-out performers whilst Brisbane and Adelaide remained steady and Perth and Darwin started a recovery after the bottoming out of their respective markets from earlier in the 2017 year.
The only real issue however for Property Developers was of course the fact that the forecast for an inevitable 'over-supply' of newly constructed 2 + 3 bedroom apartments across all three major Eastern Seaboard cities, (i.e. Syd, Mel, Bris), had now started to materialise and appeared to be more significant that had first been thought, thus creating likely problems for unwary Property Developers, Builders and their Financiers for early part of the 2018 year, once the 2017 constructed stock hit the market.
Apart from the property sector as a whole, the rest of Australia's economy continued to track along without any significant growth, with employment remaining tight as we well as business in general.
At Viking we continued to see new applications for construction funding, mostly in South Eastern Queensland as well as the odd the commercial loan or bridge finance application. We certainly noticed an absence of Chinese buyers and Chinese Developers
Market News - October to December 2017
During the last three months of the 2017 year all markets remained constant and reasonably well placed for growth into 2018, so it was 'business as usual' at Viking.
Apart from the usual level of new loan enquiry, we also took some time to talk to investors about both mezzanine lending and SMSF for investment activities, and in particular, the limitations placed around SMSF structures when it comes to their likely involvement in any form of property development.
Certainly, there are some anomalies in the prevailing Superannuation legislation which makes it very difficult, or damn near impossible, for any Self Managed Super Fund to participate in any form of new property development investment, however in conjunction with Clinton Smith (of Broadbeach Legal Group), and Danny Copley (of Pinnacle Partners at Robina), we have learned about how to legally structure SMSF activities to avoid any embarrassments after the investment event. With the upcoming Commonwealth Games, as a driver for the Gold Coast market, and with steady population increase fuelling the growth of inner and outer Brisbane and the Sunshine Coast generally, the continued growth and demand for new housing product in the SE Qld property market remains a reality for the time being.
As always, if you are looking at investing hard-money into property development, particularly up here in SE QLD, in whatever format, please do give Viking a call to discuss your requirements as we can assist with various important financial aspects of townhouse developing.