Property Finance Brisbane – The Adjustment Period
With business and society beginning to resemble some form of normality, it is an important time to both reflect on the last two months, as well as looking forward to what is on the horizon. It is paramount to have an understanding of how the lending landscape has changed, and will continue to evolve in the coming financiers we have ensured that we continue to remain at the forefront when it comes to knowing lending appetite and a lender’s willingness to transact in the current environment. Below is a brief summary of what we are seeing across the residential development and commercial investment sectors.
It is positive to see that for many of the projects that we helped secure funding for, construction has continued with minimal disruptions and a number are now nearing completion. We will be watching closely over the coming weeks and months on how settlements perform. Whilst we have seen it taking longer for off plan sales to convert, our clients are reporting that enquiry levels have remained reasonably strong considering the head winds. Enquiry levels notably improved when restrictions started easing particularly for owner occupier stock, or projects nearing completion.
From a finance perspective many banks have declared to us that they are ‘focused on existing clients and not entertaining new business at present’ – a line I was well versed in delivering through my banking career when hit with unforeseen market disruptions, namely the GFC and oversupply of units in Brisbane in 2015/16. This was not unexpected, but in recent days the message from a few has shifted to a slightly more positive tone of being open for new business, but clearly said business would need to tick all the boxes on experience, gearing and pre-sales (a task that very few can meet). As banks re-write the rules private financiers are much less bullish (or retreated). This reduced capital output is likely to lead to very select projects proceeding, a bit more dust to settle to find the new norm, however those who are not forced to sell are likely to see opportunity in the latter part of this year with less supply being brought to market.
Over the past two months, we have worked with a large number of our commercial investment clients to re-negotiate their facilities with their incumbent banks, allowing them in turn to work collaboratively with their tenants during this period. Many of these banks are offering interest free periods (capitalised interest) and term extensions to help customers ride out the storm.
Throughout this period, property investors have continued to transact and search for new opportunities. One problem frequently encountered, however, has been how to navigate through valuations given not a great deal of comparable data exists. Hence, we have seen valuers try to address the impact on values via their ‘hypothetical’ discounted cash flow assessment by estimating a period of reduced rents, potential vacancies and further incentives as banks simply will not accept a blanket COVID- 19 disclaimer. As sales are recorded in the coming months the market will dictate where yields land. We have been helping clients obtain finance alternatives where they have not received the support they expected from their financier.
Whilst the next few months no doubt represents an adjustment period, it is one that will also provide many opportunities that we are excited to be a part of it. If you are looking for support and guidance in securing finance for you next development or us at Nivcorp Property Finance.