Insights from Richard Woodhead, Managing Director of GPS Investment Fund Ltd (GPS)
At GPS, we always have, and always will, prioritise transparency and the fostering of long-term relationships with our investors. We recognise that we manage real money from real people, and because we believe in our product, even GPS employees and their families invest with us.
In a recent discussion with some of our long-term investors at an event for the Gold Coast Retirees, our Managing Director highlighted our unique approach to the development market. Unlike mainstream economists, who often base their analyses on planning approvals or optimistic forecasts from industry bodies, we rely on data from our loan pipeline. This data is more indicative of the moving market as it happens, and it has been continuing to highlight the ongoing housing shortage in Australia. Our internal data directly from the desks of the GPS lending team, reveals several critical factors contributing to the housing supply crisis:
Project Viability: Rising construction costs mean that sales growth must match these increases for developments to be feasible, but this balance is often uneven across different housing types. Being Brisbane-based, looking at Brisbane-based projects, we are in the best position to ensure the projects we fund are prepared and realistic about these changes.
Industry Pressures: Government policies have added costs to development, and securing funding has become more challenging. Many banks still rely on a presale requirement for construction loans, which doesn’t align with a rising market where tomorrow’s build costs are higher than today’s sale prices. We are starting to see more projects being presented to GPS as a result of this as borrowers seek flexibility.
Builder Shortages: Builders are increasingly drawn to government infrastructure projects, resulting in limited resources for residential projects. We are playing an active role in combining our trusted builders with developers to be a part of the solution.
History has shown us that economic cycles often repeat, and GPS’s approach is shaped by lessons learned from previous downturns, from the GFC to the economic challenges of COVID-19. Today’s high government spending, increased energy costs, and low industrial productivity echo past periods of stagflation – a time of slow economic growth coupled with rising inflation.
Amid these challenges, we stand firm in the belief that housing remains an essential need, not a luxury. Specifically, that our townhouse and apartment niche is extremely necessary to meet the demand for homes in Australia. With a cautious approach to investment, we pride ourselves in avoiding higher-risk projects that could jeopardise our commitments to investors.
Our resilience and ability to adapt in changing times is due significantly to the robust relationships we have fostered with builder-developers and our investors. These partnerships have enabled us to navigate unpredictable markets and respond to industry needs effectively. As we look to the future, we remain committed to providing stable, long-term opportunities for our investors.
Our mission at GPS Investment Fund is clear: to stay grounded in the data we know, remain transparent in the wake of change, and a commitment to quality. By embracing adaptability, informed by our own unique insights, we remain dedicated to providing investors with reliable, secure opportunities.
In return, we know that as we move forward we can be confident in our investors understanding that what looks like ‘change’ is never really change.
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