Lending curb hits housing

Tight lending restrictions continue to be the biggiest hurdle facing the residential sector.

Property developers have been encouraged to engage more readily with overseas banks in Europe and Singapore to access credit.

Tight lending restrictions continue to be the biggest hurdle facing the residential sector, with developers and alternative financiers needing to step in as “solution providers” to ensure a supply of housing in the future.

Representatives from the country’s banking, development and building industries gathered at Credit Suisse’s “Residential Coalface Conference” in Sydney yesterday and suggested a greater onus must be put on developers to find alternate financing sources in light of tighter lending restrictions by the banking regulator.

Developers were encouraged to engage more readily with overseas banks in Europe and Singapore to access credit and to extend the offer to their customers. Greater buyer incentives were also discussed as a market stimulus.

Credit Suisse’s Australian head of real estate equities research, Kateryna Argyrou, said tightened lending “was a theme that came through very clearly” at yesterday’s conference.

“Mortgage brokers, builders, developers — everyone across the board spoke about the availability of funding,” Ms Argyrou said. “Funding restrictions need to be loosened. In the meantime, alternate funding providers need to step up in a material way in Australia to bridge the gap.

“In order to get off-the-plan sales or for any development to work now, you really, as a developer, have to be a solution provider.”

The Reserve Bank kept interest rates on hold at 1.5 per cent yesterday. Many analysts, including CoreLogic’s head of research, Tim Lawless, predict a cut later in the year.

“With economic growth losing momentum, as well as inflation and wages growth remaining below expectations, there are plenty of reasons why the RBA might have considered a cut to the cash rate today,” Mr Lawless said yesterday.

“Chances are we will see some downwards revisions to the RBA’s forecasts for economic growth and inflation, which could set the scene for lower rates over the second half of the year.”

Lateral thinking was already taking place in the development arena, with an increasing number of ventures being initiated to mitigate market risks, Ms Argyrou said.

Unlisted developers are struggling to obtain finance and land prices are coming off, at the same time as listed companies are on the lookout for bargains.

“Instead of looking at these projects and trying to see if they can swoop in and get a good deal, they are trying derisk and partner with someone as they go through that restocking phase,” Ms Argy­rou said of the listed groups.

Meanwhile, Morgan Stanley’s equity strategist, Chris Nicol, told clients house prices “look like they are continuing their grind down, and we see little prospect of conditions improving over 2019”.