We hear a lot in the news about the “Housing Crisis”, and while it is an issue facing many, it doesn’t feel quite right to use the word ‘crisis’ in reference to how this economic change affects GPS, and your comfort in investing with us.
GPS has a history of producing times of solid and quality lending when the economy is having a rough patch. Why do you ask? Because when times get tough, the banks step away, but work still needs to be done, which leaves the lenders like GPS able to fill in the gaps.
Why do the banks pull back, but GPS doesn’t? The banks don’t build relationships like we do, have access to amazing local investors like we do or have their finger on the pulse of the specific niche market like we do. They don’t see the bigger picture, and given their size, they don’t care to.
GPS has always been about building relationships, which means we have real-time feedback from builders, borrowers and consultants as to what can and can’t be done to see a project succeed. We utilise these relationships, and that knowledge, to fund the projects that suit GPS the best.
There are a lot of factors currently, and in the future, that will continue to create an undersupply of housing in South East Queensland. These include:
1. An increase in demand through immigration both from overseas and interstate. Thanks to COVID a lot of people are seeing the benefit of being based in the beautiful sunny state of Queensland, when they can still work from home.
2. Supply being reduced due to increased cost of materials, sites being overvalued due to rising costs, banks insisting on pre-sales which makes projects unviable, and planning laws and local objectors that claim they want development, or new infrastructure, as long as it is nowhere near them.
3. The Olympics coming to Brisbane and the Government therefore using all available resources to ensure new infrastructure is built on time (there can’t be any delays on that job!).
These are just a handful of examples of what we see in the market at the moment – but the silver lining to all of this? People want homes and we are in the business of funding residential developments.
Our predictions based on 30 years of experience as to where this might go?
1. Inflation will continue to rise, and with it, building prices.
2. Site costs will decrease though, and we suspect we will see an increased number of distressed sales from distressed funders that will give rise to new opportunities.
3. Successful new residential development projects will require strong relationships between developers, builders and funders who can work together to produce a positive outcome.
This is why on our 30th birthday, it is important to remember the strengths of GPS and how economic changes like this are not new to us. GPS has always focussed on the smaller projects that use smaller builders and in areas where we are confident in the market. Demand is high so we will continue to work closely with our builders and borrowers to work through these changes and produce successful projects.