Opportunity to spy on non-banks in abandoned apartment projects
“Banks haven’t changed over time,” said Gallen. “The developers are left in purgatory; they can get sales, so they can’t get financing. “
According to CoreLogic, apartment prices climbed 1.18% in Melbourne and 0.42% in February.
But both markets remain slightly negative year-over-year, while submarkets such as Melbourne’s CBD, Southgate and West Sydney are still struggling.
Mr Sokolski said MaxCap and its client developers are taking a position on demand in 2022 and 2023, when most projects started now will be completed.
“If net migration returns, we believe there will be a chronic housing shortage that will work in favor of developers whose projects are completed.”
Mr Sokolski said the financing terms have worked in favor of downtown store developments, run by owner-occupiers.
In a joint venture with developers Neometro and Milieu, MaxCap is supporting the $ 45 million One Wilson Avenue project in Brunswick, which includes 41 apartments and 900 square meters of retail and office space.
Pallas Capital has extended $ 700 million of apartments over the past three years – mostly through senior mortgages – targeting high-end developments in suburbs such as Double Bay in Sydney and Malvern and Brighton in Melbourne.
“The market is definitely there, particularly in the owner-occupant space,” said Gallen.
“We have had $ 150 million in loans repaid in the past three months by developers who are able to sell products.”
Mr Harrison of Wingate said demand was greatest for small boutique developments, between 30 and 50 apartments.
“At the moment, there is a real distinction between an investor and an owner-occupied product,” he said.
“The homeowner market is pretty strong and we fund a lot in the middle and inner suburbs, driven by the ‘downsizers’ and people making lifestyle choices.”
He said Melbourne’s investor market had already been weakened by the Victorian government’s removal of stamp duty concessions on off-plan apartments. But while Melbourne’s CBD was a “very weak sector of the market”, the decline followed a period of very low vacancy rates.
Mr Gallen said the Melbourne market was just emerging from its ‘Covid hangover’, in the past two months.
“Auction closeout rates reflect a return of confidence in the market,” he said.