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Second-tier lenders offer lifeline as investors chase falling prices
Experienced property investors are increasingly turning to second- and third-tier lenders as restrictive bank lending policies threaten to lock buyers out of opportunities emerging in the declining property market.
Sophisticated property investors are increasingly bypassing the major banks in favour of alternative lenders, as tighter borrowing conditions threaten to derail their plans to capitalise on falling property prices.
Strategic Brokers’ Hung Chuy said second- and third-tier lenders were experiencing a significant increase in business from investors seeking greater borrowing capacity than the major banks were prepared to offer.
While rising interest rates and cost-of-living pressures have restricted borrowing power across the market, Chuy said experienced investors were continuing to seek opportunities to expand their portfolios.
“They are seeing an opportunity in the market and the big banks just aren’t cutting it.”
“They aren’t giving them enough borrowing capacity. Credit policy is really inhibiting people from getting what they need,” Chuy said.
According to Chuy, the shift towards alternative lenders reflected a growing divide between buyers with the financial capacity to capitalise on declining prices and those struggling to secure finance.
He said seasoned investors and upgraders were among the most active buyers, with falling prices creating opportunities to secure properties that may previously have been out of reach.
This was particularly evident at the upper end of the market, where buyers with access to finance were seeking to capitalise on price reductions.
However, Chuy warned that the downturn could further widen the gap between established property owners and buyers with limited borrowing capacity.
“I feel like the top end of town is going to get richer through this, and the bottom end is going to find it a lot harder.”
Year-end selling pressure creates opportunities
With the traditional Christmas slowdown approaching, Chuy said investors with financing in place could be particularly well positioned to negotiate favourable deals.
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He identified October to December as an attractive buying window, when vendors and agents were often motivated to finalise transactions rather than carry unsold properties into the new year.
“I always say that the best time to buy a property is around that October to December period.”
“Every agent’s trying to shut down and close out their deals. They don’t want to leave any stock there until January or February.”
Contrary to popular belief, Chuy said that while the traditional view was that spring was the ideal time to sell a property, he felt the opposite was true.
“I think it’s the worst time to sell, because rather than competing with a few hundred, you might be competing against a few thousand houses that are up for sale at the same time.”
“You’d rather sell in a market where there’s not much stock. I actually like that February-March market because there is less stock available, but the buyers are still there, so there is more competition.”
Chuy said vendors could also be motivated to settle quickly to avoid additional holding costs, including lost rental income, staging and marketing expenses.
For investors with access to finance, he said the combination of weaker property prices and greater selling pressure was creating opportunities to negotiate.
However, with borrowing capacity increasingly determining who could participate in the market, Chuy’s comments suggested those opportunities would remain concentrated among buyers able to secure the necessary credit.
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