Why are foreign investors interested in Australian commercial property?

Australia has always been a popular place for foreign investors looking to invest in the property marketAustralia has always been a popular place for foreign investors looking to invest in the property market, particularly with Asian countries like China. The Foreign Investment Review Board (FIRB) found that Chinese buyers in Australia were approved to purchase $23.8bn of property in 2015-2016, an increase from $18.4bn in 2014-2015. Australia received the second largest share of outflowing capital from China after the United States.

Despite the regulatory restrictions, and the banks’ new curbs on lending to foreign property investors, many foreign investors remain undaunted when it comes to purchasing property in Australia.

Luckily for them, there are options outside of the banks to obtain finance for the purchase of property. While banks are primarily concerned with serviceability and proof of income, private mortgage lenders like Private Mortgages Australia approach the lending process quite differently. Usually the loan is secured by property equity so as long as a foreign borrower has property assets to use as collateral the lending process should go smoothly.

One space that is of particular interest to foreign investors is the commercial property market. There are many reasons for the growth in this sector, starting with the types of investors:

Two types of foreign investors

There are two main types of investors who are interested in Australian commercial property – corporate and institutional investors, or high net worth individuals. Each of these investors has different motivations for choosing to invest in Australia, as well as a varied perspective on what they hope to achieve from their investment.

Corporate or institutional investors choose to invest offshore for two main reasons. The first is the mandate to deploy large funds, and with many domestic markets slowing, this has driven them to look overseas. The second is to keep their investment assets diverse and spread out over markets and cities that are seen to be well supported by demand, with survival possible even in the event of a global downturn. These markets mainly include Australia, the USA and the UK. Further to that, the top tier cities are seen as the lowest risk and best understood and therefore are the main focal point of investment. These cities include San Francisco, New York, London, Sydney and Melbourne.

The second type of investors – those with a high net worth – are commonly seen to be motivated to invest for migration purposes. As with corporate investors, the places high net worth investors choose to invest are within the tier one cities. The reason for this is mainly due to the cycle of popularity of these cities. Investors with a high net worth choose to migrate to these regions, driving corporate investors to strategically target these cities as their buyers are planning on moving there.

Getting a piece of the foreign pie

With continued interest in Australia from foreign investors, brokers have an opportunity to assist them in accessing funding for property purchases. According to Juwai.com’s March Chinese Consumer Survey, 25% of respondents cited financing or transferring money to pay for overseas property as being difficult. By working with non-bank lenders like PMA, brokers can help foreign clients access cost-effective loans with quick turn-arounds and in the meantime earn a slice of the lucrative foreign investor pie.

Private Mortgages Australia is able to lend to foreign investors when they are borrowing using an established Australian company.

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PMA doubles yearly loan volume

Private Mortgages Australia doubles loan book Specialist commercial lender Private Mortgages Australia (PMA) has celebrated three years in business by doubling its volume of newly settled loans over the past financial year.

PMA managing director Tony Barbone said the firm’s success was a result of an increase in small-to-medium businesses needing alternatives to the banks.

“We’ve had so many brokers and referrers come to us with clients who have been turned down by the banks. While serviceability is the greatest concern for banks, we are primarily focussed on securing the loan using property equity which allows us to be a lot more flexible.”

While Barbone was reluctant to mention the specific size of PMA’s loan book, it had increased by 151% in its second year and then a further 115% in its third, most recent year, he told Australian Broker. PMA was first established in 2014.

“We’re so impressed that we’ve been able to maintain this growth and double our loan volume year on year. We definitely have our brokers and referrers to thank for this.”

Barbone said he had also noticed an increase in the number of brokers diversifying into the commercial lending sector.

“It’s great that brokers are starting to see the benefits of working with small-to-medium businesses as there are so many who struggle to access funding when it is readily available from non-bank lenders.”

PMA currently has over 3,000 brokers in its database with an increasing number referring commercial loans to the lender, Barbone said.

“We’ve found that educating brokers about commercial loans via our regular webinars has helped us continually grow the number of referrers that come us.”

The directors of PMA expect a further 50% increase in the number of settled loans in the coming financial year.

The firm has recently focused on reducing channel conflict by bringing in ‘subsequent referral fees’ to referrer clients who approach PMA directly for additional loans. The firm has also amended its Referrer Rewards Program to make obtaining rewards simpler when referrers introduce clients to the lender.

“We have now become ‘channel agnostic’ whereby a borrower pays the same approval fee if they come direct to us or through a broker. We also allow our brokers to add a service fee or mandate,” Barbone said.

“We have also added a new policy whereby if a broker sends us a client, that client takes out a loan and then that same client comes back to us directly for another loan we will still pay the broker a referral fee.”

It’s important to respect the fact that these individuals are all broker clients, he added, especially since more than 90% of PMA’s loans come from the third party channel.

Posted on Australian Broker

 

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Birthday Bonanza: Submit a deal, get $250

Private Mortgages Australia is celebrating its third birthdayHappy birthday to us! We’re very excited to be celebrating our third birthday on the 9th July but we want to give the gifts to our referrers. Refer a loan to us between the 1st of June and the 9th of July and have your client accept an Indicative Letter of Offer then we’ll give you a $250 Myer voucher. Easy as that!

Each additional loan will also earn you another $250.

Head on over to our Facebook and LinkedIn pages and share a birthday message with us using #HoorayPMA

If you have any commercial clients that need fast, flexible finance, then get in touch with us now.

 

Rewarding our referrers

Don’t forget that we also offer great rewards to our referrers through our Referrer Rewards program.  As part of the program, the value of all transactions settled with PMA will count towards your referrer rewards total and each time you reach a referrer milestone you will receive a reward from PMA – think a nice bottle of Grange, flights, shopping vouchers and much more. Each time you reach a new milestone we’ll have a bigger and better reward for you.

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Budget 2017: Changes to stamp duty hits Victorian developers

Budget 2017: Changes to stamp duty hits Victorian developersChanges 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.

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Brokers can achieve 50% market share for business loans

Brokers can achieve commercial and business lending origination

The Finance Brokers Association of Australia (FBAA) has said that brokers can achieve 50 per cent of commercial and business lending origination.

The FBAA’s executive director Peter White said that brokers in Australia “have every opportunity to follow markets like the UK [where brokers have around 70 per cent market share] and dramatically increase origination market share”.

He said: “The high level of professionalism and best practice engaged in Australia under our regulations, and genuine concerns for skilled conduct producing best outcomes for borrowers, is a recipe for more and more borrowers using brokers.”

As an advisory board member for the Small Business Association of Australia (SBAA), Mr White said that opportunities exist for brokers in the small business sector to improve the service they currently provide.

“Many brokers are very proficient at business and commercial lending, but they need stronger knowledge skill-sets that deepen their understanding of how those loans function within business markets.

“If you are dealing with a borrower who is in an aged care facility, you need to understand the aged care market and its needs. Same with hoteliers, restauranteurs and motel owners, so you can speak their language and gain their respect.

“When you actually know their industry and market, you will own the right to their business,” he said.

This article originally appeared on SME Adviser.

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Funding options for settling a development site

Funding options for settling a development siteIn this guest post, PMA referrer, Dan Holden, Director of HoldenCAPITAL, writes about the benefits of using private capital to settle a development site.

Banks are very reluctant to get involved in lending against development sites. Some developers were getting sites funded as house investment loans because there was an existing house on the land they were purchasing. This was all too common until 2015, when the valuation industry was ordered to make a note wherever they thought the purchase was actually intended for a development project rather than a passive rental return house. The heads up from the valuer to the bank resulted in loans being declined if the bank believed it was for a development project.

Some of the reasons the banks are so reluctant to lend against a development site include:

  • An inability to prove the borrower can service the monthly interest, usually requiring 1.5 times interest cover from recurring income.
  • The main exit strategy is via a construction loan, which the banks are now only doing on a selective basis.

Banks take a view that they will only lend up to 75% of total development cost for the construction loan, and the land in a development project should typically takes up less than 20% of the total development cost. If they were to advance monies against the land, then they are reliant upon the developer putting in further cash to actually convert it into a construction facility. Being reliant upon a developer to find more money down the track is not a palatable credit answer. To put that in numbers, if you had a $10 million TDC project and the land was $1.8 million, the bank is only going to lend you $7.5 million to build the project. So if you don’t have $2.5 million now, they won’t rely on you finding it under your pillow in six months’ time.

We have seen a rise in developers using private capital to get these loans completed quickly and without the fuss of proving serviceability or an exit strategy. The cost of capital is higher at 15%p.a. however, at a lower LVR and/or with a robust sponsor we have been able to secure 12%p.a. While 15%p.a. sounds high, it is typically just for 4-6 months while the developer finalises his BA and any marketing, so the overall burden to the project is fairly insignificant. It is also better than using cash for that period and if you’re an elite property developer, you would want to see your cash invested at better than 15%p.a.

Dan Holden is Director of Holden CapitalDan Holden – Director, Holden Capital

HoldenCAPITAL is a specialist construction finance group, recognised as a market leader through its successes in deal structuring and the sourcing of debt and equity solutions.

Dan has over 13 years of development and finance experience which includes over six years in finance consultancy and funds management. You can contact Dan at [email protected].

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PMA makes new hire on back of stellar year

Royce Goh Senior Relationship Manager at Private Mortgages AustraliaPRESS RELEASE: 

Private Mortgages Australia (PMA), the specialised lender offering cost-effective loans to small-to-medium businesses, has hired experienced credit professional Royce Goh in the role of Senior Relationship Manager.

With 15 years of lending experience in Australia and overseas, Goh joins PMA from First Financial Services where he held the position of Mortgage and Business Loan Consultant. Prior to this he was the Asian Business Development Manager & Relationship Manager with NAB Business Banking.

“Private Mortgages Australia is experiencing incredible growth in the short-term lending space for commercial clients, so I’m really pleased to be joining them at such an exciting time,” said Goh. “The team are a great bunch of people who work with great brokers and borrowers and I’m looking forward to growing the business even further.”

In 2016 PMA saw a 210% increase in the number of loans settled and saw an 38% increase in the number of referrals coming in through referrer relationships. In order to accommodate this growth, PMA expanded the team with new hires, including Goh, over the last 12 months.

“2016 was a very exciting time for us at Private Mortgages Australia and with Royce joining us I can see the business getting bigger and better,” said Managing Director, Tony Barbone. “There’s been a real shift in the market with small-to-medium businesses realising that funding options are available if they get turned down by the banks. We’ve also seen many brokers diversifying into the commercial space which has seen more borrowers being introduced through referrer partners.”

“We’re expecting 2017 to be an even stronger year for us as many foreign investors look for alternative finance solutions due to the banks placing stronger restrictions on overseas borrowers,” continued Barbone. “Royce’s experience in Australia and abroad as well as his multi-lingual skills will make him the ideal person to help foreign borrowers find a loan that works for them.”

 

– ENDS –

About Private Mortgages Australia

Founded in 2014, Private Mortgages Australia (PMA) offers short-term, flexible loans to commercial clients that can’t get finance from the banks. Its transparent lending process offers quicker turnarounds than traditional lenders so that a business can get the best solution for achieving its goals. PMA offers first mortgage finance, second mortgage finance and caveat loans and can offer tailored solutions for borrowers who require urgent funding, have an ATO debt, are refinancing, are developers completing a project or are credit impaired.

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Refer now and receive an iPad Mini 4

PMA Christmas promotion

To celebrate this festive season, PMA is giving away an Apple iPad Mini 4 to brokers who actively refer good quality opportunities and connect with our business. All you need to do is refer two loans by 31 December 2016. Both loans must have an Indicative Letter of Offer Accepted by 31 December 2016. Maximum of two iPads per referrer. Get in touch to discuss your client’s needs now.

We’re open right up until Christmas day and have extra staff on board to help with the rush ahead of Christmas.

And don’t forget about our Referrers Rewards program. As part of this program, the value of all transactions settled with PMA will count towards your referrer rewards total and each time a referrer reaches a milestone they receive a reward from PMA – think a nice bottle of Grange, flights, shopping vouchers and much more. Each time a new milestone is reached there will be a bigger and better reward. Call us to find out more about the milestones and rewards – 1300 856 683.

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2016: A year to remember for PMA

The team from Private Mortgages Australia inlcuding Tim Hart, Tony Barbone and Peter Cuskelly.What a stellar year Private Mortgages Australia has experienced in 2016. In the last 12 months, We’ve seen a 210% increase in the number of loans settled in the last 12 months and, in order to accommodate this growth, have expanded our team with recent hires.

This year we’ve continued to develop great relationships with our referrers and have seen an increase of 38% in the number of referrals. To show our appreciation for the great work our referrers do we launched our Referrers Rewards program in 2016. As part of this program, the value of all transactions settled with PMA will count towards your referrer rewards total and each time a referrer reaches a milestone they receive a reward from PMA – think a nice bottle of Grange, flights, shopping vouchers and much more. Each time a new milestone is reached there will be a bigger and better reward. Call us to find out more about the milestones and rewards – 1300 856 683.

New digital presence

In 2016 we also launched our new website which provides information about the types of loans we offer and resources for our referrer partners. We’ve also made it possible for people to find out more about us through social media by joining Facebook, Twitter and LinkedIn.

To keep referrers informed we’ve held regular webinars throughout the year with our fourth webinar taking place on Thursday 8th December at 11am. You can register here.

End of year rush

The lead up to Christmas is the busiest time of year for PMA and we’ll be working right up until Christmas Day to ensure that our clients can gain access to the finance they need. To celebrate this festive season, PMA is giving away an ‘Apple iPad Mini 4’ to brokers who actively refer opportunities and connect with our business. All you need to do is refer two loans by 31 December 2016. Both loans must have an Indicative Letter of Offer accepted by 31 December 2016. Maximum of two iPads per referrer. Get in touch to discuss your client’s needs now.

Looking ahead to 2017

2017 is also looking like a very promising year in the private lending space. Further restrictions by the banks on foreign borrowers will force businesses to look to alternative solutions for their short-term finance requirements. While serviceability is the greatest concern for banks, private lenders like PMA are primarily focussed on securing the loan using property equity which allows them to be a lot more flexible and an ideal solution for foreign borrowers that can’t get bank finance.

We’ve also started to see the trend that many referrers are branching out into commercial broking and expect that the number of brokers we will be working with in 2017 will continue to increase.

We’d like to say a huge thank to all our referrers for your support in 2016 and we wish you all the best for the Christmas season. We’re looking forward to working with you again in 2017.

Merry Christmas from the team at Private Mortgages Australia.

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Benefits of working with a broker to access commercial funding

The benefits of working with a brokerIn this guest post, PMA referrer Gus Gilkeson, Managing Director of Grow Capital, writes about the benefits of working with a broker for small-to-medium businesses when trying to access commercial funding.

Obtaining funding for your small-to-medium business can be hard work. It takes a ton of time to do all that research, analyse your business needs, find a respectable lender, negotiate a deal you can live with, understand the terms of your financing, etc. That’s why working with a broker can be a really great idea. Brokers match up business owners and business lenders so that you can get the best outcome for your business. A broker could save you time, energy, and money, if you consider the costs of searching on your own.

Top 5 benefits of working with a broker:

Here’s five reasons you should consider working with a broker to access funding for your business:

1. Get the best rate. Brokers will work with lots of different lenders so that they can find the best rate possible for your financing.

2. Get the best solution. Sometimes it’s not just about getting the cheapest rate. A good broker will understand that getting the right solution is most important. For example, a short-term loan might be the best option. Your broker can help you look at alternatives to the banks that can offer specialised short-term finance.

3. Don’t sweat the details. This goes hand-in-hand with not wasting your time and effort. The point is that you can focus on running your business while your broker works on funding it. The nitty gritty? Let the professionals handle it.

4. They’re experienced. The best brokers have relationships with an extensive network of lenders and getting good deals is often all about having the right contacts. Plus, they’ll be able to tell quality deals from highway robbery — they’ll have seen it all before.

5. They’re knowledgeable. The finance world can be a confusing place with all the jargon and acronyms. However, a good broker would be in the know and could explain all the complicated terms and help you to navigate through the borrowing process.

Gus Gilkeson - Grow Capital

 

Gus Gilkeson is the Managing Director of Grow Capital where he helps Australian business owners, investors, and individuals harness their capital growth opportunities through funding.

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