Pre-sales need not define funding solutions

Pre-sales need not define funding solutionsThe current macro-economic climate has translated into tighter lending conditions for developers and lack of liquidity coming out of mainstream institutions for project development funding where there is no pre-sale activity.Development Finance Partners (DFP) director Baxter Gamble believes these conditions – coupled with new guidelines issued to investors from APRA and the RBA – are having an impact on lending in the property sector. APRA introduced new credit assessment policies last October that reduce the ability to buy property off the plan, which has forced banks to require a higher proportion of pre-sales than was typical before the GFC.However, Gamble advises that if a project is pitched at the right market niche, pre-sales need not be a prerequisite to funding success.A new project that proved to be ‘pitch perfect’ was the Omira Property Group’s townhouse development in Brisbane’s up-and-coming suburb of Cannon Hill. Though Omira Property Group is a well-established developer, its chosen banking institution declined a funding application because there were no pre-sales intended.DFP was engaged to provide a funding solution to both acquire the site and complete the construction funding; it sourced an indicative approval within one week of Omira Property Group’s request.Gamble says of the Omira Property Group project: “Pre-sales should not be a prerequisite for construction funding if your funding fits in the right price point. And this one does.”He adds that credit was obtained because the project was targeting the affordability market for first-time homebuyers and single professionals, which has good demand for both rentals and occupancy and won’t drop 40 per cent in value overnight.”We felt we had something unique to bring to the area that appealed to the owner-occupier demographic as well as investors,” says Omira Property Group director Alasdair Baker. “First-time buyers tend not to buy off the plan and they want to see what they’re buying.”DFP effectively secured the finance and the project has started. It is due for completion by June 2015. “If we’d been waiting for bank finance, we wouldn’t have met our target building deadlines,” Baker says.”Our project would not be coming out of the ground as we speak if we’d gone the traditional major bank route, and delays cost money and potentially even the whole project.”Essentially, the funds that DFP arranged have allowed us to get started and, in turn, we’ll finish quicker, which is a key to delivering a successful project.”For more information of Development Finance Partners, please visit: