Why brokers should be focusing on construction loans

As a result, over the last 18 months, many grants, incentives, and schemes have been created with the goal of stimulating the construction industry and, ultimately, the broader economy. The stimulus was immediately welcomed by the industry and has had an enormous impact on the supply/demand of houses and land, increasing land prices along the way.

The HomeBuilder Grant, in particular, started as a $25,000 incentive for those building a new home or renovating an existing one. It was rolled out on a state-by-state basis with slightly different processes and conditions, which initially caused some confusion for brokers, lenders, and the finance industry. 

It did, however, create an incredible buzz for both sectors; with builders pushing to keep up with the demand from customers all itching to take advantage of the grant, and finance professionals taking advantage of a swathe of new activity in the market.

The eligibility criteria around contract deadlines and construction commencement dates created the need for titled land (or near titled land) that could be settled and built on within the applicable dates. 

Land quickly became scarce and highly sought after. Land developers were stretched to keep up with the demand, which created an inevitable shortage, and increased upward pressure on land prices in greenfield and regional Victorian locations, which continues today. 

The time-critical eligibility criteria have also impacted the cost of new homes, as the nature of the pandemic has significantly disrupted supply chains for builders. This has also led to shortages in building materials across Australia.

The HomeBuilder Grant was reduced and then phased out in early 2021, paving the way for other government stimulus to take the front seat, such as the First Home Loan Deposit Scheme and its various iterations. 

These continue the pressure on land availability and price, as well as available building materials, with over 20,000 spots available for this scheme in the current financial year alone. 

This increase in demand and inquiry over the past 12 months has been music to the ears of the many finance brokers who work in the construction space. 

There has never been a better time to leverage your expertise as a broker and provide quality advice and recommendations to clients. 

Today’s environment continues to see these trends creating robust market conditions in the house and land construction industry, with high demand and low supply. 

So, what’s next and can the market keep up with demand? 

The reality is we are still a long way from the end of the COVID-19 pandemic. As shutdowns and restrictions continue, the government will continue to support the economy with various forms of incentives and schemes. 

The ever-increasing house prices across our states also fuel a need for the government to continue the programs aimed at assisting first home buyers into the market. 

Despite the price increases, the greenfield and regional areas are a fantastic entry point into the market, presenting some of the best value for money housing in Australia. We expect to see demand continue to grow in those areas as we open up post-pandemic.

As a broker, have a think about your level of knowledge and expertise in construction loans and question if you’re taking advantage of that sector of the market. 

There are thousands of clients out there who need assistance navigating the house and land process, and the demand for high-quality mortgage professionals continues to grow. 

As an industry, we should be stepping up to help them.