The Urban Developer
AdvertiseEventsWebinars
Urbanity
Awards
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
ADVERTISEMENT
SHARE
68
print
Print
OtherAdam Di MarcoFri 05 Oct 18

Developers, Pull Your Heads in. This is the New Norm

27a97222-450d-4f22-85a8-47a781dc07f6

For more than a year, property developers around the country have been crying poor about the state of development funding in this country.

Ever since the major banks were told by APRA to tighten their belts, access to development funding has dried up.

“This is a knee jerk reaction from our fair-weather friends,” they cried.

“It's all care, no responsibility from the Big Four.”

Well, let me break the news to you, friends. This is the new norm. But the question remains, how new is this “new norm” ?

According to a trusted property banking industry veteran of over 20 years, this looks a lot like the 1990s.

Unlike the poor farmers and the average Aussie Joe, Australia's developers didn't get a seat at the Hayne Royal Commission into Australia's banking sector.

It would have been quite the scene to wheel Harry Triguboff into 302 William Street to cry poor about the behaviour of the Aussie banks towards property developers.

(Who am I kidding? High-Rise Harry doesn't use banks!)

For those unaware of the struggle of Australia's property developers, it's bloody tough out there.

To get a residential project out of the ground, this is the sitch:

  • You can borrow about two-thirds of the total cost of the development

  • You need to stump up the balance in actual cash (or if you're really lucky, some mezz!)

  • You need to pre-sell at least 100 per cent of the total amount you borrow

  • You need to engage a builder that has a serious balance sheet, not just any Joe Blow with a shovel

  • You need to pay serious freight in interest (say, 6-9%)

  • You need to pay serious freight in line fees, establishment fees and other fees (say 3-4%) ... and the rest

  • You need to show them your books... and all of your books.

And if you do all of that, the banks are still as picky as the best looking girl at the school dance!

Straight up – there's less cash, it's harder to get and it's more expensive.

So will this change? Are we going to go back to 2013 and get the cheap money, the easy terms and the kitchen sink?

Doubt it. This is the new norm. This is the way it was 25 years ago. And this is the way it is now. Let's get use to it.

To learn more about how to fund your project, check out The Urban Developer's Development Funding 101 workshop – a case study approach to securing your project finance.


OtherResidentialAustraliaFinanceOpinion
AUTHOR
Adam Di Marco
"Adam Di Marco is the Founder and Publisher of The Urban Developer. He is also the Managing Director of Di Marco Group, a Brisbane-based boutique property development business and Executive Chairman of CityShape, a disruptive big-data start-up for the property industry."
More articles by this author
ADVERTISEMENT
TOP STORIES
Parallel Workshops Stockdale Housing PBSA project
Exclusive

Suburban Success Story Turns PBSA Thinking on its Head

Leon Della Bosca
7 Min
Exclusive

Interstate Developers Find Lots to Love in ‘Progressive, Affordable’ SA

Taryn Paris
5 Min
Bates Smart Richmond Sportslink HERO
Exclusive

BtR Focus Drives Bates Smart’s Richmond Sportslink Concept

Leon Della Bosca
6 Min
Exclusive

Carparking Correlation: How Parking Fees Provide Office Sector Health Check

Taryn Paris
6 Min
Molti chief Ben Teague out front of 32 Mercer Road Aramadale (rendering)
Exclusive

Buy to the Sound of Cannons: Molti’s Counter-Cyclical Move to Melbourne

Leon Della Bosca
5 Min
View All >
Kangaroo Point Aria Canopy House Revised DA Approval hero
Development

Aria’s Revised Tower Greenlit for Inner-City Kangaroo Point

Phil Bartsch
Parallel Workshops Stockdale Housing PBSA project
Exclusive

Suburban Success Story Turns PBSA Thinking on its Head

Leon Della Bosca
Hotel

Perth Hotel New Role Revealed After $105m Sale

Lindsay Saunders
The WA government’s acquisition is to become a part of its bid to improve housing supply in the capital...
LATEST
Kangaroo Point Aria Canopy House Revised DA Approval hero
Development

Aria’s Revised Tower Greenlit for Inner-City Kangaroo Point

Phil Bartsch
3 Min
Parallel Workshops Stockdale Housing PBSA project
Exclusive

Suburban Success Story Turns PBSA Thinking on its Head

Leon Della Bosca
7 Min
Hotel

Perth Hotel New Role Revealed After $105m Sale

Lindsay Saunders
2 Min
Warren and Mahoney's rendering of Leftfield's project at 691-693 Burke Road, in Melbourne's Camberwell.
Residential

Leftfield Lifts Cover on 14-Storey Scheme at Camberwell

Marisa Wikramanayake
3 Min
View All >
ADVERTISEMENT
Article originally posted at: https://theurbandeveloper.com/articles/developers-pull-your-heads-in-this-is-the-new-norm