Will Small developers Bankroll Innvestors??

[Gee Cee]

:eek: Following on from the post regarding Big Banks reducing their exposure to property investments.
I have not heard that much but from brief articles it appears that Banks are no longer to commit funds towards property innvesting. (Someone said prior that their exposure to the investment property innner city market was gettinng Too high?)

If Meriton is now going to virtually Bankroll investors purchasing their units. I must question if other developers in any area are going to have the same problems . Even if they can find buyers , financiers may be sitting on the fence and just not interested in financing.??

I have already mentioned how locally in Wollongong area every man & his dog's friend is a developer.

And I imagine this is the case in many areas.

Just wondering what the scenerio will be in 3 yrs time. When all these developments that have started or are in planning are finished.

Will property over next 12to 18 mths go totally stale?

What number of developers out there doing Big stuff will be able to carry the holding costs. 1) If they cannot sell. 2) If purchasers cannot get finance.
3) If buyers are chasing the next boom? :(

:cool: Anyway be great to have everyones opinion.

:D :eek: :confused: Anyway most of you know me as being Bearish at present. So i will not comment at present.

Just covering my backside. Reducing Debt / Risk. Getting ready to ride the rapids. Who knows how long the river drops in height until you reach the next level. :) Then you look back and say. WOW that was a experience.

Now that we have done it & survived . Let's go back in a few yrs & do it better :D

Happy Investing

Gee Cee

Old Fart from 1979 Boom ;)

[Aceyducey]

Hey Gee Cee,

I expect that banks will continue tightening on overbuilt markets & keep discouraging new developers through lower LVRs.

They don't want the lender market to collapse - it's their bread & butter - but they do wish to ensure their exposure is at a decent risk level.

There is no issue with gaining finance of well-placed established dwelling, only in the more speculative OTP and development markets.

I don't see established dwellings coming under increased scrutiny at this point. It would take a substantial shift in the economy to increase the risk level for established housing to banks.

Of course, this isn't to say this won't happen - just that I feel it would take a major shift from the current trends.

Another way to look at it is that banks are cracking down on all the people who believe they can make a quick buck by buying OTP (and there's still people who believe they can buy at a discount using deposit bonds....over at propertyinvesting.com.au). Clear these people out of the market & the risk levels drop substantially for lenders.

Cheers,

Aceyducey

[michaelg]

Hi,

From my biased opinion I think developers who need to move stock will need to provide vendor finance.

We've already seen it done with big developers offering House and Land packages with no deposit and in the papers recently we've seen it happening with units.

As the loan to value ratio drops on first mortgages for investment properties, the need for developers to make up the difference with second mortgages will increase. In some cases providing 100% vendor finance as first mortgagee.

For a developer to make a living they need to turnover their capital as quickly as possible. If this means a smaller portion is turning over faster with the restriction of profits not being realised till some future date, then I believe this will become a more common option.

The alternative is to sit on the stock, or rent it out. However these options are only available to those developers that can afford to do so, those who do not have to worry about the cost of capitalised interest on development loans.

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Regards
Michael G