Changing market conditions are a fact of life. If the property market was predictable then GPS would not be in business, as many more people would be doing what we do. The difference, and why GPS is still going well, is that we do not complain about market conditions. We accept (we are too small to do otherwise), analyse and work out how we adapt. If we cannot adapt then we simply stop lending, as we would sooner not take investors monies than not give them back.
We have the luxury of being able to do this as we have a long established and loyal direct investor base. We are also small enough to quickly change focus and stay ahead of the market.
In early 2016, GPS stopped lending due to concerns about where the property market in Brisbane was headed. We analysed, refocused and then got back on with business.
So far the predictions from our analysis have been correct. Banks have pulled back and have created a credit crunch for property development, the non-Australian resident market has contracted and construction is now slowing down. This will see any oversupply of apartments in Brisbane being confined to specific types and locations. GPS has no exposure to that type of product or those locations.
We have refocused our loan pipeline to increase diversity. There has been, and will continue to be, an increased number of townhouse developments which we fund. Affordability of end product is also a focus, which has seen more lending into lower socioeconomic areas.
While our market share may be increasing, its not because we are lending more money. It is because banks are lending less. GPS is but a small operator with very little overall influence on the property market. The end product delivered from traditional GPS funded projects each year amounts to less than one high rise apartment building.
While the media will come out with some big numbers and statistics, please always remember that GPS is an atom on the flea on the tail of the dog. We will continue to stick to our knitting, keep our heads down and look after the best interests of our investors. We will continue with only organic growth and will adapt as necessary.
Despite media negativity, I remain very buoyant about the GPS market for many years to come. Our loan pipeline is the strongest it’s ever been. I currently have a year’s worth of lending up on the whiteboard in my office, which affords GPS the ability to be very selective.
The product we fund is still selling. Our stable of repeat borrowers remain confident, as site prices are dropping and construction costs appear to have plateaued. Median apartment prices have remained much lower in Brisbane ($382,000) than Sydney ($650,000) and Melbourne ($480,000), which provides better prospects for growth.