Interest Rates, Inflation and the impact on Commercial Real Estate – what should you pay attention to?
Part 1: The Interplay of rates, inflation and real estate On the first Tuesday of November at around 2.30pm each...
In June 2024, the NSW Government announced they will inject $253.7m to speed-up the assessment of development applications. The end game is enabling the Government to deliver on its commitment to build more homes and rebalance housing and development around existing and planned infrastructure so communities are well serviced by transport, schools, hospitals and other amenities.
These initiatives will have a positive impact for developers and builders by improving project timelines and reducing uncertainty. For investors in commercial real estate debt through mortgage funds such as the Corval Avenue Select Credit Fund, this can lead to more investment opportunities, as smoother and faster approval processes will enhance the feasibility of projects.
Within our business we have noted increasing delays in the time it takes for planning approvals to be granted, alongside other milestone requirements, such as title registration. This significantly extends the timing of developments from concept through to completion, which is a negative for borrowers as it extends the time they need to hold funding and increases the risk of defaults for investors. The outcome of these announced Government initiatives is that borrowers and investors alike will have greater visibility on project timeframes and can price the risk appropriately.
In the meantime, we ensure that our assessment of construction financing transactions includes sufficient buffer times for project completion, taking into account factors that are outside the developers’ control. Our active management of construction loans involves closely monitoring projects and working collaboratively with developers to minimise delays.
The most recent data from the Australian Bureau of Statistics shows that the total number of dwelling approvals fell by 6.5 per cent in June 2024 compared to the previous month. The largest decrease was in NSW. We are hopeful that the announced changes from the NSW Government are a positive step towards increasing the viability and finance-ability of construction projects by addressing one of the big deal killers….time.
Corval Avenue Limited ACN 089 265 270 AFSL 238546 (Corval Avenue) is the responsible entity of the Corval Avenue Select Credit Fund ARSN 090 994 326
This document does not contain and should not be taken as containing any financial product advice or financial product recommendations and has been prepared without considering your objectives, financial situation or needs. Before making any decision relating to a Corval Avenue fund, you should obtain and read a copy of the product disclosure statement and target market determination, or other relevant disclosure document for that fund, and consider the appropriateness of the fund to your objectives, financial situation and needs.
Past performance is not a reliable indicator of future performance.
Corval Avenue does not guarantee the accuracy, reliability, or completeness of the information in this document. To the fullest extent permitted by law, Corval Avenue, its group companies, and their directors, officers, employees, consultants, and agents disclaim all liability for any direct or indirect loss or damage arising from the use of this document. All investments carry risk, and the repayment of capital and performance in any of the funds named in this document are not guaranteed.
