In 2019, Finance Will be Available to Property Developers but Consumer Lending Should Remain Tight.

Finance to Developers Will Be Available But Not From Traditional Sources

Urbanised has conducted hallmark research on the Non Bank Lending Sector for market leading property financiers and private equity investors. While the specific results cannot be divulged due to confidentiality, it would appear that developers will still have ample access to finance over the coming year. The reason is that prior to the GFC traditional banks accounted for around 70% of all development finance and non-banks had around 30% market share. When the GFC hit, many of the non bank lenders fled the market and reduced the non-bank lending sector share halved. The banks absorbed the slack and held a 85% market share up to the end of 2017. With all the recent going ons with APRA and Royal Commissions, banks market share has receded and this time the slack is being taken up by the non bank lenders. Given the spread between bond rates and finance interest rates there remains a strong flow of foreign capital willing to support the non bank lenders. The trends witnessed in 2018 should continue through to 2019 with non bank lenders getting closer to reaching their pre GFC market share. There should be no cause for alarm by regulators as Australia has one of the world’s lowest proportion of non bank finance to total finance in the world according to the Financial Stability Board.

… The News is Not So Good on the Consumer Mortgage Front

That said, there will probably be little respite on the consumer lending front. It is ironic that the same Government that instructed APRA to clamp down on the banks is now pleading with them to re-open their loan books for mortgage finance. It is going to take more than a year to get out of the current situation as banks will be all too aware of the possible ramifications of “deemed” inappropriate lending. Tight consumer lending leads to low pre sales which in turn leads to problems getting development finance. It is because of this that developers should explore product alternatives to the traditional mortgage finance to keep buyers coming through the door.