A non-bank lender has launched products designed to protect property developers from settlement failures and pre-sale drop-offs.
Chifley Securities has launched two products to shield property developers from losses incurred from settlement failures and pre-sale declines.
Chifley’s first product is in the form of a guarantee policy, which it has claimed would secure a percentage of pre-sales to reduce losses in the event that a transaction cannot be finalised.
The second product involves the layering of an additional loan to refinance any residual stock once a development has been completed.
The non-bank stated that such products would allow the construction loan to be paid back on time while also providing developers with a share of the profit.
Chifley Securities principal Dominic Lambrinos noted: “We have launched the products to protect developers during what is now a well-publicised slowdown in the market, where off-the-plan purchases are not being completed at settlement as tighter lending controls are being put in place and much lower activity by investors.
“This is particularly apparent in markets like Brisbane and Perth, where there have been a bit of drop in settlements of new dwellings.”
Mr Lambrinos claimed that investors, particularly foreign investors, have fallen away markedly over the past year, off the back of falling property prices and tighter lending conditions.
“We expect that the tighter finance conditions and less investment activity will weaken the dwelling market further over the next 12 months, causing a worsening problem for developers who gained finance on the basis that settlements will be made,” the principal added.
“We have tested the product on a few projects that were facing collapse because of the settlement drop-off and believe it will quickly gain popularity as property market and lending conditions tighten over the next 12 months.”
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