The property market is changing at a rapid rate due to many factors– some local, others foreign, some due to banks and others due to governments.  The bottom line is that financing developments has gotten considerably harder and many lenders have stopped lending for all projects except the ones which meet every single criterion of their policy.

Three out of five Melbourne developers  now struggle to access bank funding for their projects, according to a survey by the Urban Developmets Institue of Australia.  The institute’s Victorian chapter asked developers to provide feedback on how recent policy and regulatory changes were affecting them, including the move by the big banks to limit lending to foreign buyers and the states lifting of foreign buyer surcharges on stamp duty and land tax.

The results indicated a high degree of anxiety – 60 per cent of the respondents said capital was increasingly unavailable through traditional lending sources and 78 per cent expected at least one of their projects to be delayed because of the lending enviroment.

Fortunately, Master Builders Financial Services is still able to access funding via traditional as well as non-traditional sources of finance for small builders wanting to build their own dual-occupancy projects, as well as for developers wanting to finance larger projects around Melbourne.

Harry Pontikis, Manager of Master Builders Financial Services, states that the presentation of the project, the strategy of the developer and the planning for the lender’s exit are critical to mitigating risks perceived by the bank, and therefore locking in cheaper rates and better lending terms.  Having a relationship with credit assessors and being able to “workshop” an application, sorting out any issues and ensuring the assessor is comfortable with the project before a formal application is even lodged, guarantees a smoother financing experience.

Harry also states that many developers may find themselves in very dire circumstances upon the completion of their projects due to their clients’ inability to settle the apartments.  Most pre-approvals are not guarantees of finance, but merely marketing tools for banks to get prospective purchasers to stop looking elsewhere for finance.  They issue an indicative approval, stating that the required due diligence will be done closer to completion of the project. Unfortunately, most purchasers are unaware that the lending policies have changed considerably from when they originally obtained the pre-approval.  This has the consequence of leaving investors who purchased apartments off the plan unable to complete the transaction and developers dealing with the maximum debt due to the completion of the project but without the income from the sales.

Developers possessing access to an experienced finance broking firm would assist their purchasing clients with obtaining finance from lenders happy to settle on newly built apartments, as well as ensuring developers’ own applications don’t end up on the desks of banks who do not have an appetite for funding developments.  The outcome of dealing with these lenders usually entails lengthy delays, extensive requests for paperwork and unreasonable demands for additional properties, securities and guarantees– often still resulting in the decline of applications.

Therefore, if your existing lender seems to be pushing back on your requests, don’t keep demanding answers – seek the services of an experienced finance broking firm like Master Builders Financial Services.