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A non-bank private lender says the space is seeing a rapid rate of consolidation following a tightening of the property market over the last year.
Noting the trend, the CEO of non-bank finance group, Chifley Securities, Dominic Lambrinos, said “As the residential market is pulling back, there is increasing evidence of miss-pricing of loans to developers by new, smaller players.
“As a result, quality non-bank operators are becoming more sophisticated which is starting consolidation in the lending market place”, he added.
Chifley Securities increased its lending to developers and landowners from $1.45bn to $2bn in the last financial year and has reported the number of its private lenders increased 40% during the year to reach 165.
Looking ahead, Lambrinos expects developers will continue to face pressure as demand drops and pre-sales fail to convert to settlement. Further he says this activity will be concentrated in “several of the major markets”, specifically Brisbane and Perth.
“As a result of the pull back, it is becoming increasingly evidenced that many loans were mis-priced and, as a result, the lending market is becoming more challenging, especially with the tighter lending controls being put in place by APRA and expectations arising from the royal commission.
“We are also seeing an explosion in the number of private investors entering the market, especially large and small foreign funds, which are demanding greater professionalism of the non-banks and brokers facilitating transactions”, he continued.
In the last year, Chifley – which recorded more than $400m worth of loan settlements in its first year of business – adopted an aggregation division. Its aim is to provide access to funds for “larger, prominent broking firms finding it more difficult to gain funding from the major lenders for their clients and have limited access to private lenders.”
The Chifley Aggregation Group experienced loan volumes worth $1.2bn during its first financial year and expects strong growth in the division over the next year as the market tightens further.
Lambrinos said, “There are large groups across the property sector now off-limits to major lenders, despite the fact that many of the projects are viable and backed by strong equity and balance sheets.”
