The Rise of Chinese Developers in Australia

 

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February 2017

 

Knight Frank have just released a report into emerging trends of Chinese developers in Australia, the report shows statistically an insatiable appetite for site acquisition throughout the country. This long term trend is set to continue and it’s impacting local developers as they become the under-bidders and miss out on new sites.

 

The following are key takeaways from the report:

  • Chinese developers are buying larger sites, average dwellings per site in 2016 = 502 (versus 2012 = 103);
  • Chinese site acquisition represent a massive 38%  of all direct residential sites in Australia (versus 2% in 2012)
  • Chinese developers are interested in larger sites and are diversifying from apartment sites into house and land product.

These statistics underpin the strength of demand for Australian residential assets. This interest driven by China is a net positive for our region as it ultimately results in increased economic activity which in turn creates jobs. 

For access to the Knight Frank report click here

 

WTF is Happening? How Airbnb and Uber are Reinventing Economics

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Airbnb owns no real estate…..Uber owns no vehicles.

Ten years ago I bet you had never heard of Airbnb or Uber, in fact even a few years ago these companies weren’t household names. Today they are getting bigger and bigger in the economic world of the “sharing economy”.

 

Airbnb and Uber are US tech start-ups that chose their industry  – Airbnb (hospitality) and Uber  (transport) these startup disruptors are today worth $30B  and $68B respectively. 

These industries have been shaken up to the detriment of the existing incumbents and they are not going away. They’ve upset a lot of people along the way, leaving other competitors fighting to remain profitable and regulators playing catch up.

So why are they thriving?

People now see a clear benefit in using financial technology services over outdated old world businesses, the last 5 years has seen the economic landscape reshaped to the point of no return. 

WTF is happening?

What’s happening is a massive economic shift on a global scale, it’s a reinvention of how we transact and how much we pay for a service.

The invention of an internet based scalable service on an inefficient industry has been made possible by financial technology or fintech. It’s the start of what I call the smarter economy.

This global change is transforming not just transport and hospitality but also property and finance, the banks are in the fintech cross hairs scrambling to remain profitable and relevant.

Our Banking System – Get Set for Disruption

In the smarter economy, banks become less relevant as consumers (both businesses and individuals) realise the Uber effect -smarter and cheaper ways to borrow, invest, research and transact.

Imagine a massive 150-year-old organisation with hundreds of shopfront locations, thousands of staff, old and clunky internal processes and life long employees on huge salaries. Sound expensive? It is expensive….this is your typical incumbent bricks and mortar bank still making huge year on year profits.

Users of banks are becoming smarter and empowered through technology. Do we need to visit a bank to transact? No. Do people want a better deal from their bank? Yes. Do people have loyalty to their bank? No.

So where will we be in 10 or 20 years in the smarter sharing economy? I’m not 100% sure but I can guarantee many of the traditional business models will no longer be around and although many new businesses will fail you can bet the likes of AirBnB and Uber will be thriving.

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Crowd Property Capital is a non-bank lender that effectively cuts out the middle-men in business loan transactions. Put simply an investor (business or individual) who has funds to loan can provide a borrower with these funds on agreed terms. The lender receives a rate between 8-12% pa and the borrower gets access to funds faster.  Investments are available on a wholesale basis to local and international sophisticated investors with a minimum investment of $500,000 AUD. For more information visit www.crowdpropertycapital.com.au

 

 

 

 

 

 

 

 

 

 

Shark Tank Rejected Property Investment Platform Reloads

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January 2017

 

In what was one of Shark Tank Australia’s biggest shutdowns of the second season, founder of Crowd Property Capital (CPC) David Lovato reflects on what was a cringe-worthy flat out rejection on national TV.

“From the moment I entered the shark tank I realised they hated the idea of backing a property industry start-up. I was a made to look like a property industry villain and walked straight into a bear trap.

I didn’t get any feedback from the show until the actual airing. As soon as I watched it I knew it was bad. Instead of my mates giving it to me there were crickets; not a word of banter but rather uncharacteristic blokey support which was concerning”

Fast-forward 6 months and the impact of getting on the show (and failing) has inadvertently become a major factor towards the early success of CPC. The online property development funding platform has taken on board the collective criticism from the sharks and changed the focus of the business model.

Originally the CPC platform was pitching to smaller retail investors, the focus is now purely on the sophisticated investor interested in lending debt capital to developers solely on a 1st mortgage basis.

The reality is, property development and investment are inherently risky and investors entering this space usually have substantial funds to invest, an appetite for risk and it’s not usually their first deal.

“There has been a lot of buzz around the ability of the online community via P2P and crowdfunding to open up the property industry to smaller retail investors. I learned from the Shark Tank that even the sharks don’t fully understand the risks and returns in property development; so obtaining investment from smaller “unsophisticated” retail investors is a hard sell.”

Since the Shark Tank pitch last year, David’s taken a measured approach to growing the CPC investment platform.

Teaming up with existing established private lenders, CPC has found its place in the market by offering 1st mortgage security investments yielding between 8 to 12% annually. The CPC website www.crowdpropertycapital.com.au showcases some of the available debt finance deals. This web-based platform provides wider access to potential investors both locally and offshore. All investments are debt style and start at a minimum of $500,000 AUD.

“CPC is essentially evolved into what I’d call a “trad-tech” investment platform. We are focusing on partnering with established private lenders to increase their investor base as there is a huge demand at the moment for non-bank finance.  

With the major banks reducing their exposure to development debt finance local developers are seeking additional funds to complete their project pipeline. 

Traditional private lenders have numerous quality deals with great returns that they are struggling to fund purely due to the gap that has emerged in the market from the majors scaling back. With the property market so hot at the moment, we are focused on cherry picking the best deals. Quality, not quantity is key.”

 

5 Tips for Better Understanding Peer-To-Peer (P2P) Property Lending in Australia

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Written by David Lovato – Crowd Property Capital

 

As a bumper year for property investment comes to a close emerging trends towards non-bank finance in the property space gather steam heading into the new year.

Developers need more funds to deliver their projects as the major banks pull back on finance.

As more investors get comfortable with researching higher yielding investment opportunities we take a look at the key things you need to know about Peer to Peer (P2P)  debt style lending in the Australian property market.

 

  1. Don’t chase high returns

 

If a debt offering is returning 18-30% and is a mezzanine type deal chances are its extremely risky. A developer is only paying this pain money as a last resort as accesses to cheaper funds are no longer an option for him.

If things go wrong you are at the bottom of the pile and you will probably not see a cent.

 

  1. Know your investment timeframe

 

Investing in a P2P loan means you are essentially becoming the bank and loaning money, borrowers (in this case property developers) are looking to use your funds and in return you are providing them with a fixed rate for your money for a fixed period of time.

You generally won’t have the option of getting your funds back prior to the expiration of the agreed period. Most developers will need these funds for 12-36 months until they get settlements at the end of the project.

 

 

  1. Seek investment Security

 

Just like the banks, P2P investors should be looking at security in the underlying asset to protecting their investment.

Security can be achieved in a P2P debt loan by being the senior debt provider and in exchange receiving the 1st mortgage over the property. Combine this security with lending up to a maximum of 60% of the Gross Realisation Value (the assets value once the development is complete) and your investment is cushioned with a relatively good factor of safety.

Lending on a first mortgage basis is the safest way to ensure your investment is protected. Generally returns around  7-10% per annum can be expected in today’s interest rate environment. If a developer defaults on your loan the benefit of first mortgage security is you have the ability to act swiftly and recoup your investment should things go wrong.

 

  1. Research sectors and markets

Like the stock market, investors need to do some research. You need to understand the basics of a property market and drivers of economic development.

Where is the project located? Is it close to new government infrastructure? Is there a need for housing, education, commercial offices, healthcare services or retail services in that particular area? What are the underlying economic forces that give this project the best chance of success. Does the borrower have a proven development team with delivery experience and track record.

You should ask all these questions prior to investing.

 

  1. Deal with local established private lenders

Your best chance of a good initial (and repeat) experience in the relatively new online P2P lending market is to deal with local established operators.

If you come across a P2P website pick up the phone, make contact and get to know who your dealing with. You will soon find out if they know what they’re talking about. 

Established operators operate in an ASIC regulated environment usually within Managed Investment Schemes. Invest in contributory mortgage schemes as opposed to pooled mortgage schemes. With a contributory scheme you are investing in a mortgage fund with the benefit of your investment being limited in default liabilty to only your project as opposed to multiple projects.

 

Private lending by pooling funds to loan to borrowers is not a new concept, it was once only available to wealthy individuals who had the contacts to achieve higher return. Now with the Internet opening up investment markets and major banks pulling back funding these P2P opportunities are becoming more readily available.

 

For further information on P2P lending contact David Lovato at Crowd Property Capital on +61 434 932 634 or visit https://crowdpropertycapital.com.au