As property development projects in the urban centres slow dramatically, Director of Alpha First Mortgage Investments Scott Massey says this has created new lending opportunities in the regions.
“Alpha First’s total mortgage investment portfolio has shifted to encompass more regional property development lending recently in response to an increasingly unstable property market.
“For instance, a year ago, our portfolio included around 50% property secured lending in Auckland and 50% in the regions. That’s now shifted to 61% of our funds being lent in the regions,” says Massey.
He says the Auckland and Wellington property markets are currently exposed to the greatest property price adjustments.
“We’re more confident that the regional markets are insulated from the factors driving the change in the two big cities,” he says.
This time last year our lending team predicted that there would be less market disruption in the regions so Alpha deliberately shifted lending focus to regional centres and now feels that its portfolio lending risk is appropriately balanced for the period ahead.
With a total loan book of over $150m, and 61% of its property development mortgage investment opportunities outside of Auckland, Massey says Alpha First is one of only a few lending companies in the market with a preference to actively seek out property development lending opportunities in regional New Zealand.
“Although the criteria have changed for the types of property development opportunities Alpha First considers, demand has not dropped off, despite the property market cooling.”
Over 90% of Alpha First investor clients are repeat investors, according to the company’s June investor survey. Survey respondents cited the main reason for choosing to invest with Alpha First was the company's conservative approach to lending. This has proven a sound approach for Alpha First, where all lending is secured by first mortgages.
“Over many years we’ve worked extensively to finance development projects, including refinancing, and restructuring all types of property finance. My core team also has extensive experience in the property transactional lending sector. This deep knowledge of the industry has enabled Alpha First to facilitate hundreds of loans since our inception, and we’ve never lost money on a loan.
“But even with that track record, we are today taking an even more conservative approach. Pre- sales are now a prerequisite for all property developments we fund, and we are more stringent around the experience and capabilities of our borrowers,” he says.
Massey says Alpha First’s return on loan investment is also very attractive, sitting at around 9 – 9.5% before tax.
“We are still in a good position to help wholesale investors looking for mortgage investment opportunities, which are in high demand as the credit squeeze continues to come from the major banks.”