Time for smaller projects

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GPS has currently seen an influx of applications for 20-plus unit and townhouse developments. Pricing for such loans is currently at a premium, due to risk levels and competition.

A conversation I regularly have with borrowers, builders, etc. is to have a look at the 10 to 20 dwelling size developments. While not necessarily as profitable as larger developments, they have reduced sales risk. Across the GPS loan portfolio we have not seen any real sales or settlement risk for this type of development.

Profits from larger developments are quickly consumed by interest at peak debt amounts, if the construction loan has to be extended due to declining sales rates.

The smaller the number of units in the development, the sooner a borrower can get the residue stock down to a level which can be refinanced at cheaper bank rates. There is also a reduced risk of having to discount sale prices in order to clear stock.

GPS will generally fund such projects with no pre-construction pre-sale requirements.

The GPS investor base generally likes these types of projects. They also assist us with our loan spread.

These are the only loans where I will “sharpen the pencil” on fees, interest rates, LVRs etc.

If you have a project where you are looking for a loan between $3 and $6 million in the Brisbane area, then please give me a call.

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