Asian Banking & Finance - New Sydney investment offers 65% loan-to-value ratio
Conservative lending reflects cautious market sentiment in Sydney's industrial sector.
SINGAPORE, Apr. 22 2024 / Asian Banking & Finance / – A new investment opportunity from RealVantage has emerged in Kirrawee, Sydney, featuring a 65% loan-to-value ratio for a project focusing on the development of industrial assets such as warehouses and storage units. The safety net provided by this ratio, amidst the partially completed construction, offers a conservative yet potentially secure option for investors against market fluctuations.
Keith Ong, Co-founder and Chief Executive Officer at RealVantage, discusses the implications of the current loan-to-value ratio, noting its reflection of broader lending standards in today’s economic climate.
"Given the current situation, banks have become more conservative. It’s not uncommon that you see a 60 to 65% loan-to-value ratio these days," Ong explained. He contrasts this with more robust market conditions where banks might offer ratios as high as 75-80%.
The project’s appeal is further bolstered by the fact that the development application has been approved, with construction already underway. This reduces both planning and construction risks, key factors that typically deter investors.
However, the partial completion of construction presents a nuanced scenario. Ong cautions that while this can indicate a growing market under certain conditions, a partially completed project that remains vacant could signal financial troubles or investor withdrawal.
"One has to be very cautious about partially completed assets. Do scrutinise and look at whether the prospect of being able to continue is very important," he advised.
Investor interest could be swayed by several market trends according to Ong. Key factors include population growth, supply conditions, and interest rates. "In parts of the city experiencing population growth, this drives real estate demand which essentially fuels prices," he states. Conversely, a market constrained by limited supply amidst strong demand could see a rise in prices or rents.
"We are currently in a heightened interest rates environment. High interest rates typically curb real estate demand," Ong added, highlighting the importance of being aware of economic indicators that directly affect real estate investments.
For investors considering this opportunity, the conservative loan-to-value ratio suggests a cautious approach by lenders reflective of broader economic uncertainties. Yet, the strategic location and the advanced stage of construction might offer a compelling case for investment, provided that thorough due diligence is conducted to assess the potential for project completion and market growth.
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Disclaimer: The information and/or documents contained in this article does not constitute financial advice and is meant for educational purposes. Please consult your financial advisor, accountant, and/or attorney before proceeding with any financial/real estate investments.