Small-scale developers have a vital role to play in easing housing supply and affordability challenges by increasing the density of existing urban centres.
Compared to their large-scale peers, smaller developers are better suited to finding missed opportunities in the utilisation of existing urban spaces. They can ensure that underutilised spaces have the best use, by way of infill development, extensions and renovation projects, which add to the supply-side of housing. Their ability to fulfill this role however relies on access to finance.
Unfortunately, traditional lenders have long neglected or poorly served this critical area of the property market. Specialised marketplace lenders such as CrowdProperty can solve the financing pains of small-scale developers, and help to ease Australia’s urban housing woes.
Density helps to solve housing woes
The most efficient form of development raises the density of established urban areas by means of infill developments and the overhaul of existing residential properties.
This can help to mitigate the spread of suburban sprawl, by achieving more efficient use of available land and pre-existing infrastructure in established urban areas. These are the areas where most Australians want to live, with 80% of Australians residing in capital cities. Urban areas are also set to see heightened pressure on rents and affordability with the return of skilled migrants who are more inclined to pursue job opportunities in city centres and typically rent rather than buy.
While the development of new precincts on the peripheries of existing cities also helps feed supply, this requires the costly development of new infrastructure and amenities. It also places residents at a considerable distance from established commercial districts.
Smaller developers best suited to infill projects
Because of their flexibility, small-scale developers are far better suited to increasing the density of housing via infill projects or the refurbishment of pre-existing residential properties.
Bigger developers who enjoy the advantages of access to funds have their own formulaic approach to the creation of large-scale projects from fresh cloth.
From a purely economic perspective, it doesn’t make sense for larger developers to undertake the small infill and refurbishment projects that help increase urban density.
These projects require the more adaptable, bespoke approach that smaller developers often bring, so they can better fit into the existing urban environments where density could be increased.
Small-scale developers need better access to finance
The ability of small-scale developers to improve housing supply through small-to-medium density urban projects is dependent on their ability to access specialist finance in a timely and transparent manner.
A recent survey of small-scale property developers in the UK^ found that 42% believed better sources of funding would best enable them to build more homes. Financial access was far and away their greatest concern, well ahead of improved tax policies (9%), improved planning systems (10%), or an improving economy (17%).
This highlights the challenges small-scale developers face in securing finance for their projects, with the same problems believed to exist here in Australia.
In addition to difficulty accessing funds, small-scale developers also face the problem of a lack of transparency in the financing deals they make, due to the unregulated nature of the private lending market.
This lack of transparency often means they need to pay a range of hidden fees that can significantly increase the cost of funds, or assume a punitive turn should projects go awry through no fault of their own.
CrowdProperty’s mission is to serve small-scale developers
As a specialised marketplace lender, CrowdProperty’s mission lies in solving the financing pains long endured by small-scale developers.
CrowdProperty’s team consists of property experts who specialise in providing first mortgage financing of high-quality residential real-estate developments.
We build direct relationships with developers, acting as partners who provide ongoing support throughout the lifecycle of projects. Our commitment to transparency also means property developers can give us their full trust when it comes to the pricing of funds.
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Wholesale investors can earn up to 8.5% p.a. target income returns* by investing in CrowdProperty project loans — learn more.
^CrowdProperty UK developer survey
*Target returns, not forecast returns. For wholesale investors only. Terms, conditions, and risks apply.