Can active lending drive property market confidence?
Speaking at an AltX event for the construction industry NSW Building Commissioner David Chandler OAM highlighted active lending as a prudent approach that can be used to attract consumers and investors in the future.
“We need people to understand the way in, the stay in and the way out so people can invest with greater confidence. Active lending is critical to heed off problems. Financiers have taken their eye off the ball, so development drawdowns are frequently not compliant with property standards.”
Nick Raphaely, Co-CEO and Co-Founder of AltX, a provider of real estate debt investments, said given the challenging year in the property market and the impacts of COVID-19 and inflation, investors want to be confident in the knowledge that their property investments are thoroughly evaluated on both the credit and property development side.
“Not all construction projects are the same. We maintain a tight funnel in scrutinising deals and this means only a small proportion of deals presented to us are ultimately funded. We lead with our own capital and bring in investors alongside us.”
This means AltX works closely with the developer and builder on every project to pre-empt any issues or delays while also ensuring the Office of the NSW Building Commissioner compliance requirements are met.
While the current significant undersupply in property and the dramatic fall in the rental market presents opportunities for residential property investors, Chandler highlighted the market is ripe for further risk management.
“If the industry had applied more due diligence and active lending management, we may have avoided much of the industry brand damage that has had such an unacceptable impact on purchasers.
Assetline Capital Director, George Khoury, said developers could no longer get away with mediocre construction. “We have to be aligned as a lender, and we only want to deal with high quality, high calibre players. If you’re not working to the best quality you can, you won’t have an end customer – and you won’t get the capital.”
The Commissioner’s office supports the introduction of iCIRT, an independent five-star rating system, managed by Equifax to assess building professionals. Chandler hopes 80% of developers will be rated next year with the first five-star rated developer to be named later this week.
"The rules in NSW have changed for the good and costs are normalising,” said Chandler.
“The cost of non-compliance and rework that was once transferred to consumers is now retracting.”