Switzer Daily
Maximise your returns on Australia’s property boom
21 July 2021
There’s one clear winner in Australia’s property boom, and
that’s the banks. That is the view of AltX founder Nick Raphaely.
Almost ten years ago, Nick spotted a compelling opportunity
to match untapped sources of capital supply with surging demand amongst property-backed
borrowers and developers.
“For investors, it’s become harder to find
yield in traditional asset classes like Australian government bonds, which now
offer just 1.5%,” says Nick. “But what if you could be the bank in this red-hot
property market? That’s what AltX is designed to do.”
Private capital floods back into real estate debt âlike a boomerangâ
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Private capital chasing higher yields in the booming property market has fuelled an explosion of new non-bank lenders offering construction and investment loans this year, according to one of the countryâs leading commercial mortgage brokers, Stamford Capital.
â[Lending] has come back like a boomerang. There was a huge dip [last year during the pandemic] but then the market has swung back even harder compared to where it was 12 months ago,â Stamford Capital joint managing director Michael Hynes said.
âThereâs more money, itâs cheaper and non-bank lenders are being materially more aggressive in chasing deals,â Mr Hynes said.
Cheaper mezzanine funding on the cards for developers
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The resurgent housing market has delivered a double boost to residential developers in the form of cheaper debt as banks look to partner again with mezzanine lenders.
“Residential is back with a vengeance and, particularly over the last six months, off-the-plan developers are able to show the strong pre-sales needed to secure mezzanine finance through the main trading banks,” Michael Hynes, joint managing director of mortgage originator Stamford Capital, said.
Mezz is back: Stamford Capital’s co-managing directors Domenic Lo Surdo, left, and Michael Hynes.
Mezzanine finance is a higher-returning – but riskier – form of credit that ranks behind the senior, or bank, debt for repayment. By combining bank debt with a mezzanine loan from a non-bank lender, Mr Hynes said developers could cut their borrowing costs by 15 to 20 per cent.