Changes to stamp duty concessions in the latest Victorian budget and restrictions from banks on developer finance are driving property developers to seek alternatives for finance.
The 2017/2018 State budget has introduced changes stating that from 1 July 2017, purchasers of off-the-plan commercial properties or residential investment properties (not yet constructed) in Victoria will be liable to pay stamp duty on the purchase price or the market value of the property (whichever is greater). This will not affect owner occupied off-plan purchases.
Until now, Victorian purchasers of real estate that was not yet constructed were only required to pay stamp duty on the value of the land and any improvements that were already constructed on the land, as at the date of the contract. The value of any construction or refurbishment that was carried out on or after the contract date and before settlement was disregarded for the purposes of calculating the purchaser’s stamp duty liability.
Under the proposed new regime, purchasers of commercial properties or residential investment properties who enter into an off-the-plan contract of sale on or after 1 July 2017 will be liable to pay duty on the purchase price or the market value of the property (whichever is greater).
This will have a significant impact on the purchase price feasibility for property investors and the confidence of developers to attract sufficient pre-sales to obtain financing in the current challenging lending environment. Furthermore, obtaining finance for development projects has become even more difficult with banks placing stronger restrictions on lending and increasing serviceability requirements.
Property developers are copping blows from both sides, however there are still options for obtaining finance for projects from alternative lenders like Private Mortgages Australia. The flexibility of non-bank lenders will be an attractive option for developers who are finding it difficult to access a loan following the restrictions being put in place by the banks.
To discuss developer finance please get in touch with Private Mortgages Australia.