Property lenders are lining up to provide capital on new projects as the industry suddenly gains momentum, in stark contrast to the situation six months ago.
According to Stamford Capital’s annual Real Estate Debt Capital Markets survey, non-bank lenders are taking advantage of this renewed confidence across a number of asset classes.
Survey participants include the big four banks, second-tier banks, non-bank lenders, foreign financial institutions and the broader private capital market—more than half of which have loan books of more than $500 million.
In this TUD+ Briefing, Stamford Capital joint managing director Michael Hynes discusses the outlook for construction lending as well as an easing in pre-sale criteria with increasing deal competition from more non-bank lenders.
“There’s more money, it’s cheaper and non-bank lenders are being materially more aggressive in chasing deals and the leverage that is available is greater than it was 12 months ago,” Hynes said.
“The irony is, we are currently in a red-hot residential market, and the idea of getting no pre-sale finance prior to the pandemic was seen as a ‘special’ thing, whereas now, we just grab it off the shelf.”
Survey results suggest non-bank and private lenders are loosening lending criteria, with 30 per cent of participants not requiring pre-sales to fund construction, compared to 14 per cent a year ago. More than half of private lenders do not require any pre-sales.
Pre-sale thresholds have also dropped back—a little more than half of all lenders now require pre-sale commitments of more than 35 per cent of debt coverage, down from 72 per cent pre-pandemic. However, 88 per cent say pre-sales hurdles are likely to be maintained.