It is difficult to be definitive about property markets at the best of times. Currently it is influenced by many factors which are outside our control or knowledge i.e., China, COVID, global liquidity levels and the flight to safety, migration timing and levels, the Olympics, etc.
Overall, I believe that there are more positive elements than negative. History has also taught us that SEQ will slowly, but surely, try to match the property prices of Sydney and Melbourne until their prices again surge.
I am confident that it will continue to grow despite what the media may say. Some areas will boom and bust, while others are steadier.
In 2022, I expect several larger residential development projects to be put on hold.
These projects are funded by the banks, and larger financial institutions, which require pre-construction pre-sales. The issue for this financing model is that building prices are escalating. This means that developers must sell at today’s prices but build at tomorrows prices. This adversly impacts on the viability of these projects.
I am looking forward to a better year for GPS in 2022.
We are one of the few operators who have come through the collapse of solicitor trust account lending, the GFC and property booms and busts. We now appear to be past COVID and have a very strong loan pipeline.
I am seeing that the traditional bank model of funding (pre-sales) is less competitive now in comparison to GPS. Add to this, the poor service level of banks and you see our overall offering as quite appealing.
While there is growing competition from institutional funded non-banks, the South East Queensland developers remain a bit parochial and are wary of newbies and southern blow ins.
As we move into the year, it is a great time to reflect on why GPS is still here:
1. We have not sought or will seek to be the biggest. It is all about achieving and maintaining an optimal size.
2. GPS sticks to its knitting. We only lend in South East Queensland and have a two-hour rule for loans. If you can’t drive there in under two hours, it isn’t a satisfactory security. While rating agencies (watch the movie “The Big Short”) and institutional funding require diversity of lending across the eastern seaboard of Australia, we know you like that we stick to the areas we know and understand.
3. We are not subject to the whims of financial planners or mortgage brokers. Our borrowers are mostly direct.
4. We aim to always treat our borrowers as clients and work with them to solve inevitable issues. This level of customer service keeps our borrowers coming back.
Thank you for your ongoing commitment and support of GPS through your investments. We will look forward to a chance to do it all again in 2022.
Richard Woodhead | Managing Director