How the market’s changed this year
With a hot property market nationwide and COVID-restrictions impacting the country, it’s only natural that this impacts Southern Cross Partners. In the last six months we’ve seen an acceleration of existing trends and some new factors impacting how we run our business.
More financial advisors are coming directly to SCP. An interesting trend we’re seeing is that advisors are finding it easier to come to specialist lenders like Southern Cross Partners in the first instance, rather than looking at options with the banks first.
As the banks tighten interest rates, house prices continue to rise, and demand outstrips supply, we expect this trend to continue.
At SCP we pride ourselves on our response time, with the ability to turn around loans in a matter of days once it’s accepted. We also construct our loan agreement based on what we know investors like. There’s no point in us taking on a loan if investors don’t want to back it. We decline around 90% of our loan applications and work to conservative lending criteria to ensure we find that sweet spot.
Further upswing in construction loan applications. There’s a large increase of infill housing happening in Auckland. Typically, we’re seeing larger residential sections with one property being demolished to make way for several terraced homes. This is similar to the upswing we saw in Christchurch in the wake of the Christchurch earthquake. We’re also seeing neighbours develop properties together or selling their sections together to developers.
We work a lot with return borrowers and advisors in the construction space, because their history with us gives us an additional level of trust. We know they have a proven track record of success with us, and our conservative LVRs of no more than 65% on construction loans means we have a large buffer if we need to navigate any issues.
Valuations are continuing to increase. By September, house prices had risen 26.3% year-on-year, hitting an average of $900,000 across the country and $1.4million in Auckland. We’re seeing increased valuations as a result and are planning our approach in case this continues. That’s why it’s important for us that we always lend on the lowest possible valuation.
