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Housing supply in Australia : the impact of the availability of development finance

Bryant, Lyndall (2010) Housing supply in Australia : the impact of the availability of development finance. In Proceedings of 2010 International Conference on Construction and Real Estate Management, China Architecture & Building Press, Queensland University of Technology, Brisbane, Queensland, pp. 386-391.

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Abstract

Before the Global Financial Crisis many providers of finance had growth mandates and actively pursued development finance deals as a way of gaining higher returns on funds with regular capital turnover and re-investment possible. This was able to be achieved through high gearing and low presales in a strong market. As asset prices fell, loan covenants breached and memories of the 1990’s returned, banks rapidly adjusted their risk appetite via retraction of gearing and expansion of presale requirements.
Early signs of loosening in bank credit policy are emerging, however parties seeking development finance are faced with a severely reduced number of institutions from which to source funding. The few institutions that are lending are filtering out only the best credit risks by way of constrictive credit conditions including: low loan to value ratios, the corresponding requirement to contribute high levels of equity, lack of support in non-prime locations and the requirement for only borrowers with well established track records. In this risk averse and capital constrained environment, the ability of developers to proceed with real estate developments is still being constrained by their inability to obtain project finance.
This paper will examine the pre and post GFC development finance environment. It will identify the key lending criteria relevant to real estate development finance and will detail the related changes to credit policies over this period. The associated impact to real estate development projects will be presented, highlighting the significant constraint to supply that the inability to obtain finance poses.

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ID Code: 32588
Item Type: Conference Paper
Keywords: Real estate development, Global Financial Crisis, availability of finance, lending criteria, Housing Supply
ISBN: 9787112126125
Subjects: Australian and New Zealand Standard Research Classification > BUILT ENVIRONMENT AND DESIGN (120000) > URBAN AND REGIONAL PLANNING (120500) > Housing Markets Development Management (120503)
Australian and New Zealand Standard Research Classification > BUILT ENVIRONMENT AND DESIGN (120000) > OTHER BUILT ENVIRONMENT AND DESIGN (129900) > Built Environment and Design not elsewhere classified (129999)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Banking Finance and Investment not elsewhere classified (150299)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > COMMERCIAL SERVICES (150400) > Real Estate and Valuation Services (150403)
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Past > Schools > School of Urban Development
Copyright Owner: Copyright 2010 Please consult the author
Deposited On: 16 Jun 2010 07:43
Last Modified: 07 Jun 2011 20:15

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