Has a new $68 billion investment market, with returns reaching 30% pa, actually developed in the Australian property sector without anyone really noticing? As it turns out, it has.
This market was the focus of Basis Point’s 1st Annual Non-Bank Lending Conference in Sydney last week.
It was standing-room only when 300 delegates converged on the Westin Sydney to talk about the meteoric rise in the non-bank lending (NBL) sector, the new solutions these NBL firms bring to the market, and the huge opportunities and high returns that are available to successful non-bank lenders.
Attendees included:
- A majority of the biggest and best known non-bank lending firms,
- Some of the nation’s top lawyers and consultants,
- Dozens of Australian and Chinese-Australian property developers
- At least 8 BRW Rich 200 ‘equivalents’ from Chinese, Australian, and Asian family offices and ultra-high-net-worth individuals (who we could identify…on the grapevine we were told more UHNW were in attendance but wanted to keep a low profile. Australian UNHW have long been active as private lenders in this sector)
The Honourable Michael McCormack, Federal Minister For Small Business, opened the event, and Lead Trade Advisor Michael McKissack of the Australian Federal Treasury outlined Australia’s need for foreign investment.
Key insights that were shared included:
- The Big 4 banks have created a $68 billion market by restricting their lending to Australian home-buyers and property developers (CT Johnson, Basis Point)
- Returns for private lending deals run as high as 30%, depending on the nature and structure of the deal (John Poulsen, Squire Patton Boggs)
- Australia needs foreign investment equivalent to 4% of GDP each year to maintain the state of its economy (Adam McKissack, Australian Federal Treasury)
- Chinese investors have substantial interest in the non-bank lending space (Conghan Hu, Zank & Co, and Vince Lim, SumoSIV)
- Non-bank lenders aren’t a substitute for banks, they’re a new, additional resource for borrowers (Scott Price, PropertyShares)
- Big data can give useful insights to anyone wanting to enter the non-bank lending space (Ted He, RBG)
- There’s substantial demand among foreign buyers for lending solutions to help them with settlement of their individual residential purchases (Drew Bowie, MaxCap)
- While they are much more flexible than banks, non-bank lenders won’t just accept any deal (Chris Andrews, La Trobe and Vince Lim, SumoSIV)
- Organizing your information and being realistic about the project can make all the difference in obtaining funding from a lender (Matthew Royal, DFP and Melissa Hosgood, Blossom)
- For lenders, when it all goes wrong, there are lots of options for mitigating risk (Barry Kogan, McGrathNicol and John Poulsen, Squire Patton Boggs)
We would like to again thank the sponsors of our Non-Bank Lending Conference for their support:
Gold Sponsors Development Finance Partners & La Trobe Financial
Silver Sponsors Lefand Group, MaxCap Group, Zank & Co, Sentinel Security Group, 365Financial, Squire Paton Boggs and Realty Base Group.
Site Acquisitions Seminar this week -supply and value equation to change
Meanwhile, a reminder that registrations for our Site Acquisitions Via NSW’s New Strata Laws Lunchtime Seminar is now open. Wednesday 28 September, Doltone House, Hyde Park Sydney. Cost: $148 plus GST
The event will discuss a potential ‘game changer’ on site supply and valuations due to the 75% rule where three quarters of owners of a unit block can sell as a group and ‘compel’ the remaining 25% to sell under ‘fairness’ provisions in the new strata laws.
This new law will lead to gentrification opportunities in the older and expensive suburbs of Sydney where older blocks could be sold and redeveloped with higher densities.
This will boost the supply of hard to get apartment sites in the older inner suburbs of Sydney that have the zoning capacity for higher density dwellings. This means more apartments in areas closer to the city but also means fewer ‘cheaper’ dwellings as the old apartments are demolished.
What will this mean to site prices as supply increases? What will this mean for affordable dwellings in inner city? How will ‘gentrification develop? How will the ‘fairness’ provisions be applied to the 25% who don’t wish to sell? How quickly will other states adopt the new framework?
We have 5 key speakers on these topics including
- The NSW Fair Trading Commissioner
- The author of a benchmark NSW study on how the new strata laws could impact on the community and on the development industry
- The principal of Sydney’s leading strata law firm and a director of Strata Community Australia
- A consultant on strategic land use and statutory planning who sits on several NSW government panels and committees and provides expert evidence for the NSW Supreme and Land & Environment Court
- A member of the NSW Strata Industry Working group and who is the architect of the new strata legislation dealing with strata termination in NSW where compensation (fairness) is determined in the Land & Environment Court
Please click here for details and to register for this week’s event
Our sponsors include Bannermans Lawyers, O’Connors Strata, Dainty Associates and BIV Reports.
Next Basis Point event – Aus-China Sentiment Conference
There is heightened public and political sentiment in the Aus-China relationship which will become more volatile & influential in the years ahead.
Basis Point is pleased to announce that a major conference covering the nature of this sentiment and the impact on business, society and politics will be the topic of our next conference. Please click here to register your interest as a speaker, sponsor or delegate, (early bird pricing will be only offered to those who have expressed their interest via this link)
ABS Statistics show slower growth as we predicted –but the outcome is better for the market
Data from the Australian Bureau of Statistics (ABS) were released last week. As we forecast, Sydney dwelling growth rates fell from 9.7% p.a to 3.6% p.a (we forecast 2.8% based simply on the fact that the massive 8.9% June quarter growth last year would be dropped from the calculations of the annual growth rate — see last week’s newsletter)
Tables of the latest ABS statistics are below
Source: Australian Bureau of Statistics
We believe this slower growth rate is good for the long-term health of the Australian property market because:
- When property markets boom too strongly, speculators pile in for a short term punt, developers overcommit, and sellers stop putting stock on the market in expectations of higher prices –leading to misaligned markets which is not a good outcome for the industry.
- The RBA can now state that official annual growth rates are much lower than before, meaning they will be less worried about ‘run-away house prices’ as part of their management of interest rates and currencies. While the currently high auction rates will fuel sentiment and demands for the RBA to ‘do something,’ the central bank has consistently undertaken action that weeds out short-term noise.
- As the table below shows, the next quarter (to Sep 30) results need to come in at 3.1% for the annual rate to remain at 3.6% p.a growth.
- Political and public concerns about ‘run-away house prices’ should lessen as the RBA soothes the market, thus reducing the risks of the housing market becoming a political and populist football.
- Chinese investors will be less fearful of governments (State and Federal) imposing additional taxes (eg as has Canada) to curtail booming prices or tax ‘outsized’ returns that booming markets create. This in turn produces steadier demand from offshore investors which adds to supply in the property market (and which should reduce rents as the rental vacancy rates climb…see our newsletter last week) and enables developers to better plan within a less volatile supply/demand environment.
The charts below show quarterly changes for the main cities. Annual rates are calculated by adding the past four quarters of returns.
Source: Australian Bureau of Statistics and Basis Point
Source: Australian Bureau of Statistics and Basis Point
Source: Australian Bureau of Statistics and Basis Point
Source: Australian Bureau of Statistics and Basis Point
Source: Australian Bureau of Statistics and Basis Point
Site Acquisitions via NSW Strata Law Changes – when fairness meets fortunes, 28 Sept 2016, Doltone House, Hyde Park, Sydney Click here