Life for residential property developers is not easy in the current market.
Build and marketing prices are increasing faster than sales prices. The pull back by the banks has increased funding costs, with developers now competing for available funding.
GPS took all this (and more) into consideration when planning how we want our loan pipeline to look in the 2019 financial year.
Rather than simply taking projects willing to pay full freight for finance, we are on a drive for better quality loans.
We are prepared to “sharpen the pencil” for the right project to fund.
Our investors really like loan sizes between $3 million and $6 million for residential development projects in South East Queensland and… “he who has the gold makes the rules”.
Accordingly, GPS has a strong appetite for those loans.
While townhouse developments are the flavour of the month, I can see signs that the Brisbane apartment market is starting to settle.
So far in 2018 there has been some pressure on sales rates, which has pushed out loan terms. We now have a number of loans repaying in the next couple of months, which means we will have plenty of cash to get back out the door.
Projects funded by GPS on the both the Gold and Sunshine coasts are outperforming Brisbane projects in terms of sales rates. Both before and after construction has started. They are not subject to the same market supply pressures as we are seeing in Brisbane.
GPS continues to have an appetite to fund projects on the Gold and Sunshine coasts.
In the past 6 months GPS has not settled any loans for unit developments in Brisbane. Other non-bank lenders tell a similar tale. They have not been filling the gap left by the banks. This appears to indicate that the Brisbane apartment market should settle sooner rather than later.