Developers turn to Asia to plug funding gap

As settlements began last week for ICD Property’s  633-apartment Eq. Tower on A’Beckett Street, many were being financed by offshore lenders.

ICD managing director Michael Mai and his deputy Matthew Khoo said they had began informing their buyers and actively liaising with foreign lenders as local banks began tightening their lending criteria earlier this year.

“We have signed an agreement with them to partner up with them (the buyers) to provide the finance solution for the offshore buyers,” Mr Mai told The Australian Financial Review.

Mr Mai said his team began contacting buyers six months ago as the banks began to cut credit, as many offshore purchasers may not have been aware of the change in policy.

Foreign banks, mostly from the Asian region, were looking to increase their exposure to Australian property, he said.

“There’s a lot of them out there. It’s a testament to the Melbourne property market. We have good values,” he said.

A number of developers in the market have reported an increase in lending from offshore as local banks and non-bank lenders step back from the apartment market.

In October private developer Tim Gurner said new sources of mortgage lending were coming from a Singapore private lender, HSBC Bank and ICBC (Industrial and Commercial Bank of China), along with Taiwan’s United Overseas Bank (UOB).

Two years ago ICD won backing from giant Chinese property developer Sino-Ocean Land Holdings for the 63-level, $300 million high-rise tower it is developing in the Melbourne CBD.

Speaking at the recent “topping out” ceremony for the tower, Mr Mai and Mr Khoo said valuations for the new apartments had come in “on price”, with little variation to the original purchase agreements.

That had made it easier for new lenders to back the purchasers.

However, the developers were allowing some buyers to extend their settlements by between two and four weeks as they completed arrangements for their finance.

“We’re really thankful that a lot of overseas banks have addressed that gap in the market,” Mr Khoo said.

“In a short period of time we’ve seen a lot of other finance options available for purchasers.

“Because it has happened so suddenly you will see that some purchasers will take longer than it normally would to sort out their finance.”

The proportion of all-cash settlement had also increased to between 10 per cent to 12 per cent.

About half the buyers in the Elenberg Fraser-designed tower are from offshore. Construction is due to be completed in July next year.