Bye bye banks: private lender’s $1.5bn fund a saviour for foreign investors & developers

It’s been one of the most widely reported stories in real estate in the last 12 months; Australia’s first and second tier banks tightening their lending criteria for foreign investors, making it much more difficult for them to secure loans for new property purchases.

Of course, not only prospective purchasers have been affected but also buyers who signed up for off the plan contracts, and may still have two or more years before the completion of their property. For some of these buyers, the inability to secure an Australian bank loan will mean forfeiting their deposit and their property.  Not a good outcome for any stakeholder; buyers, developers, builders, agents or government.

Property is no longer just local; it’s now a global commodity. With activity in more than 25 countries, we at Investorist experience the impact of lending changes like this on a macro and micro level.

Australia no longer number one

With thousands of Chinese agents using our platform, one of the immediate effects we’ve witnessed in our China offices is that US cities like New York, Miami, Los Angeles and Houston have now become the preferred investment destination for the Chinese. EB5 visas facilitating permanent residency have much appeal, and the US lending environment is much more straightforward than Australia’s.

Similarly, the fall in the value of the pound following Brexit has made UK property significantly more affordable. London and the ‘Northern Powerhouse’ cities of Manchester, Liverpool and Leeds are red hot with Asian buyers right now.

Australia hasn’t entirely lost its appeal though; Melbourne, ranked as the most liveable city in the world for the last six years, remains a big drawcard.  The fundamentals of why the Chinese love this country are still in evidence; blue skies, clean air, open spaces, quality schools and a stable political and economic environment, so it’s unlikely to drop out of the popularity polls any time soon.

Given the increased international competition for the investment dollar, a new guaranteed loan product that promises a viable alternative to the tight-fisted banks is sure to be embraced with open arms.

$1.5bn private lender fund

Investorist has been in discussions with several groups with regard to making property financing solutions more accessible to the platform’s users, and has partnered with one of our larger clients to promote non-resident lending available to those who require it. The company has a proven track record, having funded non-resident loans since August 2016.  The $1.5bn represents the first loan-ready pool of funds, with more to follow. Available to most applicants subject to serviceability criteria and verification of income, the fund is set to be a game changer in the property investment market.

The fund offers much flexibility for borrowers:

  • Available for new, completed and under construction properties
  • Multiple products and lenders available
  • Interest only and P&I loans
  • Borrowers can be individuals or companies
  • Loan terms up to 30 years
  • Maximum LVR of 65% or 75% for Hong Kong and Singapore citizens
  • Interest rates from 5% on completed property
  • Loan sizes from AU$100,000 to AU$1,000,000
  • Refinancing of existing loans also possible

Fund launch in China

The pent-up demand for this type of non-bank private lending is very high in China, and will no doubt be well received. The fund’s products will be introduced at our China Connection Event being held in Shanghai and Shenzhen during the week of 27 – 31 March.  International developers from Australia and the US will be meeting with hundreds of pre-qualified agents who have expressed interest in buying off plan projects for their clients. Having representatives on the ground to explain the funding options and qualification criteria for securing loans will be extremely valuable for both parties, boosting confidence that all deals will be able to proceed smoothly to completion.

In a country where access to online information is strictly controlled (no Google, Facebook or other western social media platforms are allowed due to the internet firewall), Chinese buyers rely heavily on the advice and knowledge of their local advisors and agents in order to purchase foreign property.

Dollars for developers

Local or overseas-based developers can also apply for loans through the fund. Whilst primarily aimed at individual property investors, for developers seeking additional finance for their own projects or the reassurance that any buyers they do secure will be able to settle on completion, the fund is also likely to have great appeal.

Once the deals start flowing, and more and more purchasers (and maybe developers) are happily saying ‘bye, bye banks’, it will be interesting to see how the big banks react.