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Industry News
by Fiona Roberts, Chief Operating Officer, IBN Private: Alternative Funding Solutions
Appearing originally in the Urban Developer magazine, Issue #91, Sept/Oct 2014
Units and townhouses are the property market ’s new ‘Little Black Ad-Dress ’, netting premium returns and 70 per cent funding options , leaving Aussie dream homes sitting on the rack.
Private lenders – high net worth families, superannuation funds and managed investment schemes – are financing the growing demand for high density housing without a single pre-sale.
Scott Roberts, whose alternative funding company IBN Private sources private investors, said apartment popularity was simple: units were in fashion and moved fast.
“I have lenders that just won’t finance houses,” said Mr Roberts, whose national business – based on the Sunshine Coast – has access to up to 200 private funders nationwide.
“And that’s because units and townhouses are easier to sell – the stock turns over quicker.”
He said while houses were still the ‘Australian dream’, the unit market was not only an easier point of entry for new owner-occupiers, but for first-time developers as well.
“The biggest selling points for us is that everyone has been conditioned by the bank that they need pre-sales and that is our big point of difference,” the 46-year-old said.
"But when you’re building townhouses many of our funders do not require any pre-sales compared to banks which will require up to 100 per cent pre-sales to have 100 per cent of their risk covered.
“And when the developer doesn’t need to sell off the plan, buyers will pay a premium price because they’ve been able to walk into the unit, go out on the balcony and take in the vista – and virtually every unit these days has a view of oceans, rivers, cities or mountains.”
Mr Roberts, who was a state manager of a leading aggregator before starting IBN Private 10 years ago, said private lenders were plugging the finance gap as the major banks knocked back an average of eight out of every 10 development deals that landed on his desk.
“We had one case where a developer with a multi-level project near the Brisbane CBD – who had a nod and a wink from their bank that they would fund the deal – started the project themselves only to run out of money and have the bank change its mind,” he said.