New build financing gap boosts Southern Cross
The lender says it experienced a 10-20% increase in investor demand last year amid a lack of available funding for the construction and sale of new homes.
Southern Cross CEO Luke Jackson says would-be buyers of new homes, often first-time buyers, struggle to secure financing as banks will only lend against completed properties. The lender says builders are reluctant to begin projects without the buyer's financing in place, leaving both parties in a stalemate.
Jackson says this has created a “mismatch” in the market. He adds: “The banks want a finished house, but the builder needs money to actually build the project. If the building company goes out and buys the land and builds the house, they become a developer and it’s even harder for them to get finance – very few, bar the big turnkey builders like Universal Homes, can do something like that."
Southern Cross says there is growing demand for its "bridge" financing products. Bridge financing provides builders with funds to construct a property, satisfying the banks and enabling buyers to then receive a home loan.
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