Small-scale Australian developers turning to specialised marketplace lenders
An increasing number of small-scale developers in Australia are turning to specialised marketplace lenders for their financing needs over traditional banks, CrowdProperty Australia has said.
The Australian sister company of the UK peer-to-peer lender noted that banks are renowned in Australia for supplying finance to the property market, but criticised their lack of knowledge when it comes to funding smaller developers.
It said that specialised marketplace lenders have the necessary expertise to understand and fund these types of projects.
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“Banks are large organisations, so they need to be generalist by nature,” said David Ingram, CrowdProperty Australia chief executive and co-founder.
“When it comes to the bread and butter of ordinary residential mortgages, banks are fine. But if you’re talking about anything beyond that — even renovation or construction finance — then it’s outside their comfort zone. They lack the knowledge to understand what smaller developers are trying to build and deliver. They don’t understand the risks or have the knowledge to mitigate those risks.”
The inability of banks to provide adequate financial services to developers, is also exacerbating Australia’s housing shortage by constraining supply growth, Ingram said.
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“We know NHFIC and the government have a target of building a million homes in the next five years, and immediate targets of 30,000 for affordable homes,” he added. “Banks need to play a part in funding this, but because they’re not providing enough finance to small-scale developers, they’re missing a key part of the market.”
Ingram believes marketplace lenders, such as CrowdProperty, can cater to the needs of property developers because they possess specialised sector knowledge.
“Our proposition is really about property people lending to property people,” he said. “Our business is made up of property experts, which means they conduct specialist due diligence, as well as provide niche expertise that helps the client deliver on their project. We understand what developers are trying to deliver.
“We’re smaller and more nimble, so we can get things done faster. We can provide decisions within a day or two, as opposed to the larger banks, who can take three to six months to make a decision.”
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