Celebrating the Journey to Date
From 2011 to now, HoldenCAPITAL has been involved in many exciting projects and we estimate we have helped to complete some $2.3billion worth of projects as a result of the $1.6billion of funding we have sourced and provided since our inception. We are pretty excited by those numbers, because results delivered are the best advocate of the value you add to a client and when you distil it down this is our primary objective, fast and competitive funding solutions.
One thing we are particularly proud of is our elite team. All of the people below were hand selected / head-hunted to join our team of rock-star financiers and nearly all of them were known to me well before they started. Some I had worked with for a decade or more, which meant I had a good reading on their character and integrity and integrity is a key asset in our game. On the lender front we have seen some interesting new entrants to the finance space since the banks were heavily regulated, responding to demand exceeding supply, similar to what we saw with construction debt a few years ago with the usual opportunists popping up. Having the discipline to play the long game and value your reputation over a quick fee is paramount to a long career, and I am very proud of our team and their approach to how projects should be funded. I just wanted to commend them on that and our achievements in the journey of HoldenCAPITAL so far, thanks HC team.
A few things we have observed along the way;
Good developers find good projects, mainly because they are disciplined in their selection of what they are willing to accept, and put their name to;
Capital is the oxygen of your development business, everyone needs it to function,some do it well, many do it haphazardly and reactively, rather than strategically and proactively;
Cheapest isn’t best, think of the many builders who went broke in the recent apartment boom. Likewise we have seen some bad planning / design outcomes of projects due to rushing and under-valuing the consultant team on a project;
Sales and your exit is paramount, start with the end in mind and work backwards to fill the gaps. As a developer, when all your profit is tied up in those last few products don’t accept compromise in design. It should be a priority, remember property developer are property traders, not property collectors;
There is always going to be capital available for good projects, if a project is struggling to get funded, it is most likely due to the project, not the capital markets being shy or closed for business. There is an abundance of capital sitting ready to deploy, it is just a matter of knowing where to find it and having the relationship and reputation that the door will be open for you to pitch the deal.
A few observations about the market as at December 2018
In SEQ, the focus shifted to smaller owner-occupier focussed product and infill subdivisions which is the usual direction taken by the market at this point in the cycle. There were no real surprises in this and we expect more of the same in 2019 as the projected improvements in the Queensland economy combined with the affordability gap, particularly as regards Sydney, leads to an improved net interstate migration flow that will drive an improving development landscape. This will also likely drive new subdivisions, initially in the infil sector and we are already seeing signs of this.
Conversely, in Sydney we witnessed a rapid slowdown in the rates of sale and demand for new project sites, with many developers now faced with projects that are no longer stacking up. While we expect that opportunities in Sydney will continue, there will be a need to exercise caution with an increased emphasis on the demand fundamentals and ensuring that the delivery process is robust.
Melbourne is lagging Sydney in the cycle and with strong international migration and better infrastructure support is likely to enjoy a softer landing. We have seen a steady flow of sound opportunities and expect this continue through 2019 albeit with the market continuing to slow from its highs but at a more manageable rate than Sydney. Again the focus will be on the product meeting market demand with an increased requirement on proving the value proposition.
There is some debate as to the likelihood of interest rates rises with the general consensus being they would begin in 2019, however the recent hint by the RBA that a further decrease was not off the table indicates that the market could remain relatively flat for at least another 12 months.
Given we continue to see an influx of new lenders to the sector with many beginning to look at the low interest gap being left by the banks, it is our view that it is unlikely that we will see any significant increases in the foreseeable future. The positive of that is developers can plan their projects around having reliable capital availability, and with the right guidance, using their capital effectively to grow their business without too much risk.
Thanks for 7 years of fun
Many thanks to our customers, suppliers, team and referral partners for helping us so far and we are excited about a mutually beneficial relationship going forward.
Enjoy the summer break, we look forward to chatting in 2019.