Settling before the silly season begins

Settling before the silly season beginsThe stress of closing deals before Christmas is a headache that can be avoided, says Development Finance Partners director Matthew Royal.It’s a busy time of year, as the pressure for valuations to be signed off, presales completed and finance settled reaches fever pitch before Christmas.”Right now, we’re seeing projects sold at the back end of 2014 coming into settlement,” Royal says.”There’s a flurry of activity, and everyone in the industry is under tremendous pressure to close off as many deals as possible before the Christmas period kicks in.”If the deal isn’t done before Christmas Eve, then it can be the back part of January before solicitors, valuers and bankers – not to mention the industry – are back on deck,” Royal says.Alongside the silly season frenzy, Royal says tighter lending restrictions – particularly lower loan-to-valuation ratios – are affecting the industry.”As a result of reduced LVRs, the settlement risk on many purchases is being tested.”It’s been estimated that around 20 per cent of purchasers are finding it difficult to settle on contracts they made 12 months ago, primarily due to additional servicing requirements of banks,” Royal says.”This means around one in five purchasers is struggling to settle their loans. Twelve months ago, we had much laxer LVRs, but fast forward 12 months and the lending landscape has changed considerably.”In this environment, developers are keenly seeking finance providers and products that can help purchasers settle on high LVRs – because if they can’t settle they are left with a mountain of debt and a massive interest bill.”Royal says a secondary lending market presents a smart solution.”Now is the time to arrange secondary finance for those purchasers having difficulty settling the contracts,” he says.”Developers that are left with residual debt with the bank on contracts that can’t settle can also look to a secondary lender for help,” he says.”But you have to act fast with only a few weeks left in the year. The key is to get a finance system in place before Christmas to ensure peace of mind over the break. Otherwise you’ve got high debt hanging over your head at the one time of the year you can’t do anything about it.”DFP can help property developers enjoy the Christmas season with a range of low doc and no doc capitalised interest products at affordable rates. To find out more, contact Matthew Royal at Development Finance Partners.