Valuation changes transferred risk to lenders – Avamore

The lender also noted that it did not believe the development finance market was seeing any seismic changes yet but added that developers were having significant issues.

Like other lenders, it said it was considering options such as extensions to deal with the “black swan” event, and was evaluating new applications on a case-by-case basis.

In a video posted on its Linkedin account, Avamore Capital co-founder Zuhair Mirza (pictured) explained there were issues for the sector at the moment and the potential for a slowdown to come.

“Developers are facing challenges on site. There’s practical issues of getting labour on site and getting construction projects going and progressing as originally planned,” he said.

“There’s also probably a second order effect further down the road in relation to what could be a slowdown in the housing market.”

And for borrowers who may be having issues in completing projects to repay loans Mirza said the lender was willing to help.

“We have a black swan event now. We’ve already seen lenders coming forward to grant extensions or find ways to deal with delays or issues that may have arisen,” he said.

“That’s a pretty consensus view in the market and obviously we’re on board with that as well.”

Heavily caveated valuations

Mirza was speaking with Richard Jones, managing director of broker firm Pilot Fish.

When Jones asked about the state of valuations, Mirza acknowledged it was a fast-changing market.

“We started with valuations provided. That very quickly moved to valuations being heavily caveated amid material uncertainty, which effectively meant that lenders couldn’t place the same reliance on those valuations that they would usually do and there was effectively a transfer of risk to lenders.

“Then we’ve had incremental challenges,” he continued, “how we approach it now depends largely on a case-by-case basis.”

And he concluded noting that any seismic changes in the market would be caused by the pulling out of institutional capital.

“But I don’t see that happening. There is that dislocation of markets today, but I think institutional capital is attracted to our market because there is a very strong fundamental case for investing in it,” he added.