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Non-bank lists ‘no-go zones’ for construction loans

Non-bank lists ‘no-go zones’ for construction loans

Chifley Securities has revealed its list of “high-risk” suburbs and “no-go zones” for financing residential developments. 

Non-bank lending group Chifley Securities has released its list of suburbs in Sydney and Melbourne that it considers “high-risk” or “no-go zones” for financing new residential developments. 

“We have created the no-go zones on the basis that many outer-lying suburbs of Sydney and Melbourne pose serious risks for both developers and buyers due to an explosion of development activity,” Chifley Securities principal Dominic Lambrinos said. 

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The greenfield suburbs in Sydney that made the list include: Schofields and Box Hill regions, Leppington, Badgerys Creek and Kemps Creek, Kurrajong Heights, Katoomba and Orchard Hills.

In Melbourne, greenfield development sites that are considered “off-limits” by the non-bank lender include: Plumpton to the Bacchus March corridor, Truganina to the west, Officer to the East and Cranbourne to the South.

“These areas are seeing explosive growth in the number of residential dwellings, yet are not yet supported by the necessary infrastructure required to support vibrant communities,” Mr Lambrinos said.  

“While there might be a new railway station, road and supermarket in a suburb, this infrastructure does not fill the requirement for a sustainable and healthy and profitable development for both developers and residents.”

However, the list is not fixed, according to the Chifley Securities principal, who said that it will be amended once the market and amenities in the listed suburbs have “caught up” with the developments “saturating the suburbs”. 

Chifley Securities has claimed to have lent developers about $2 billion in the 2018-19 financial year, with Mr Lambrinos observing that there has been a boost in developers turning to non-bank lenders recently. 

The non-bank financing group in May reported a 16 per cent rise in property developers seeking urgent financial assistance as their project sales and pre-sales had waned, partly due to “tighter lending controls”. 

“We continue to see more residential developers coming to Chifley and our competitors as their pre-sales dry up, amid the realisation that many have paid comparatively high prices for their land,” Mr Lambrinos said.

“While credit guidelines have been loosened by the Australian Prudential Regulation Authority, financing by the major lenders continues to be tight, and non-bank lenders are taking up the slack.”

[Related: Property developers increasingly seeking ‘urgent’ assistance]

Non-bank lists ‘no-go zones’ for construction loans
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