More property developers turn to non-banks
Alpha First Mortgage Investments has enjoyed 20% growth in demand from borrowers in the past six months as more property developers seek to access non-bank financing.
Scott Massey (pictured), director of Cambridge-based Alpha First, said the mortgage investment firm was set to double its loan book within the next two years with the help of its brokerage Omega Capital, which funds property developers across New Zealand. Currently, Alpha First has $150m worth of investor funds and 60 loans in its portfolio.
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“Thus relationship gives Alpha First investors the prime opportunity to source and invest in registered first mortgages secured over saleable land and buildings,” Massey said.
“As many developers have been unable to access bank capital due to the current economic climate, inquiries into Omega Capital have increased 50% over the past year.”
In recent months, Massey said the more conservative lending environment had affected mortgage loan terms and conditions, which is why Alpha First would only be approving very few loans with a LVR above 50% unless collateral security was available.
This was a sharp contrast to the circumstances six months ago when it approved loans with an LVR of around 60%. In addition, many of these approved loans didn’t require presales and, where construction was involved, had a maximum term of 12 months.
Now, presales have become a prerequisite and loan terms have increased up to 15 months for multiple housing units or subdivision sections.
“This more conservative loan environment means the quality of investment options we can deliver to our wholesale investors is quite high,” Massey said.
“Our Alpha First clients need to be mindful of how these changes might impact their investments, however the benefits over bank investments are still very attractive, demonstrated by our continued, rapid portfolio growth.”
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But the worst was yet to come for borrowers as New Zealand entered a tighter economic phase, Massey said. The continued hardship of securing loans from traditional banks had resulted in the rise of non-bank lenders.
“Alpha First investors along with other non-bank lenders are in a good position to help alleviate this pressure and keep the housing market going,” he said. “Housing demand is not easing up anytime soon, so New Zealand must find a way to maintain construction activity to build the required supply.”
