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How many property development lenders are there in Australia?
Hello! Thanks for your question about the number of property development lenders are there in Australia. The short version is that there are 54 banks with a total of 5,480 branches in Australia, along with 31 other financial institution in Australia. Most of these banks do some form of property development lending. There are other private companies that do property development lending, however exact numbers of these companies are not readily available. Below you will find a deep dive of my findings.
METHODOLOGY
I began my research by looking for definitions and trends in the Australian lending market. I searched industry reports, company publications, and media reports. Following that I searched industry reports and listings to find the number of banks, branches, and other lending institutions in Australia. I then searched through company websites, listing services, and agency reports to find the exact number of private property development lenders, but was unable to come up with an exact number. However I was able to find many examples of these kinds of companies, the services they offer, and why one might use these companies instead of traditional lenders.
DEFINITIONS AND TRENDS
We have defined a property development loan as one that provides funds for construction of multiple properties on one title. These loans are then split up into residential and commercial loans. A residential loan may be appropriate for building up to four units, for example, duplexes or town houses. Anything bigger than that will usually require a commercial property development loan.
The Australian Prudential Regulation Authority’s (APRA) has recently tightened its regulation on lending, especially for investors or higher risk borrowers. An example of this regulation is that lenders are now offering less credit to investors in relation to property price. For example, Bankwest is allowing investor loans to have a maximum loan-to-value ratio (LVR) of 80%, compared to its previous LVR of 95% for investors. A development financing company indicates that standards in some places are even higher for construction loans, dropping from 80% of total development cost(TDC), down to only financing 65%-70% TDC of construction projects. This has caused many investors looking for property development loans to move away from traditional banks and to private funding companies. This is possible because APRA regulations only apply to deposit holding financial institutions.
BANKS AND TRADITIONAL LENDING
In June 2015, there were 54 banks with a total of 5,480 branches in Australia, along with 31 other financial institutions, such as Building Societies, Credit Unions & others in Australia. Main retail banks in Australia make up 95% of bank branches, or 5,088 branches. Most of these banks do some form of property development lending. Banks approved an estimated 302,610 home loans to investors over the year ending June 2016. As previously stated, these loans are mostly being given with an LVR of 80% or even lower for investors.
PRIVATE LENDING FIRMS
As the banks have tightened their lending practices, private lending firms have filled in the gap and are offering a full array of property funding solutions. These companies are similar to private equity firms, except with an emphasis in property development. Global Capital Commercial specifically offers private equity mortgage funding, as well as other funding solutions. Development Funding provides funding packages with a mix of traditional finance as well as private construction finance. There was a wide assortment of these types of companies available in the Australian market. Since these companies are not as well regulated and don't have the same type of reporting as banks do, the total number of private lending institutions in Australia wasn't available.
CONCLUSION
To wrap it up, those looking for property development lenders in Australia have a wide variety of options available. There are 54 banks with a total of 5,480 branches in Australia, along with 31 other financial institutions, such as Building Societies, Credit Unions & others. Numbers of companies offering private equity funding weren't readily available. Banks and traditional institutions offer funding for lower risk developers with high levels of capital, and other private funding companies offer alternative options for higher risk investors. Thanks for using Wonder! Please let us know if we can help with anything else!