Mortgage investment firm, Alpha First, says demand from borrowers for funds has grown 20% in the past six months on the back of a growing need for property developers to access non-bank financing.
With $150M of investor funds and 60 loans in its portfolio, Director Scott Massey says the firm is on track to double its loan book within the next 24 months.
“Alpha First works with our other company Omega Capital, which primarily is a brokerage, financing property developers operating across New Zealand. This relationship gives Alpha First investors the prime opportunity to source and invest in registered first mortgages secured over saleable land and buildings.
“As many developers have been unable to access bank capital due to the current economic climate, inquiries into Omega Capital have increased 50% over the past year. This demand for non-bank loans is good news for our wholesale investors at Alpha First, many of whom are looking to diversify their overall investment portfolios.”
Massey said the market has changed considerably since last year and the more conservative lending environment is affecting mortgage loan terms and conditions.
Alpha First will approve very few loans with a Loan to Valuation Ratio (LVR) above 50% unless there is collateral security available. This is very different to six months ago, when they were approving loans with an LVR of around 60%.
“This more conservative loan environment means the quality of investment options we can deliver to our wholesale investors is quite high,” says Massey.
Massey said in 2021 a large proportion of loans approved by Alpha required no presales as market values were still increasing. Further to this, where construction was involved, there was a 12-month loan term. However, pre sales are now a prerequisite and loan terms have increased to as much as 15 months where multiple housing units or subdivision of sections are involved.
“Our Alpha First clients need to be mindful of how these changes might impact their investments, however the benefits over bank investments are still very attractive, demonstrated by our continued, rapid portfolio growth.”
Massey says the credit crunch for the property sector in New Zealand will get worse as credit gets tighter and interest rates continue to rise.
“With inflation at 6.9% to March 2022, we’re entering a tighter economic phase in New Zealand and that’s going to continue to put a squeeze on access to bank finance.
“Alpha First investors along with other non-bank lenders are in a good position to help alleviate this pressure and keep the housing market going. Housing demand is not easing up anytime soon, so New Zealand must find a way to maintain construction activity to build the required supply.