Banks are holding developers to ransom with “take-it-or-leave-it” deals that demand “unreasonably high” equity injections and pre-sale or pre-lease commitments, the Urban Taskforce’s Aaron Gadiel told Architecture & Design today.
Under these demands, many previously feasible projects no longer stack up, Gadiel said.
While, in theory, the finance may be available, in practice a new project “may no longer be viable” because of the conditions that the banks impose.
Developers who do not have an existing relationship with a bank are struggling to get projects financed. Those who do, are tied to their bank even if they are unhappy with the terms of their agreements. Developers are simply unable to get any offers from alternative banks with whom they do not have an existing relationship, Gadiel said.
“There’s a lack of competition now in the commercial lending market now,” he said, with architects being the first to “feel the chill winds” of the freeze in new projects.
While the government’s Australian Business Investment Partnership (AIP) would provide a safety net for existing projects reliant on foreign funding, it was a “limited scheme” that failed to help new commercial development projects and would do nothing for residential projects, Gadiel said.
The Urban Taskforce called for a similar investment initiative aimed squarely at the residential market.
This comes the same day that the Reserve Bank has predicted Australian house prices to retain their values better than those overseas, despite the wilting economy.
“We continue to believe that the market here will hold up better than overseas,'” RBA deputy governor Ric Battellino said in a speech to the Urban Development Institute of Australia in Brisbane.
