Long-term development funding options needed

He says most lenders have 12 to 24 month products and mortgage advisers say there is definitely an opening for a long-term commercial product, particularly as development funding is difficult to obtain.

“Small scale construction development finance is practically non-existent after banks and non-bank funders pulled the plug because of the perfect storm 18 months ago when rising interest rates, falling house prices, increasing construction costs, the Gib crisis and few pre-sales for development projects all hit at the same time. It made funders nervous.”

Before that Stevenson, who has become a Funding Partners business development manager after two-and-a-half years as a specialist loans analyst for development and construction funding, says the firm was doing a “fair bit” of development lending and managing projects through to completion. “Most of the funders we were working with have exited the market over the past 12-18 months.”

Stevenson says despite plateauing interest rates, slowly rising house prices and falling construction costs, development and construction funding is still difficult to get.