USING BRIDGING FINANCE TO ENABLE LISTINGS - MANAGING LOW STOCK LEVELS WITH BRIDGING FINANCE
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USING BRIDGING FINANCE TO ENABLE LISTINGS MANAGING LOW STOCK LEVELS WITH BRIDGING FINANCE 16 APRIL 2021 1300 411 455 www.catalyst.com.au Level 5, 2 Bligh Street SYDNEY NSW 2000
CURRENT STOCK LEVELS
CoreLogic’s Research Director (Tim Lawless) recently. commented “buyer demand is so intense, it is
outweighing the ability of sellers to put their property on the market” For every 100 listings brough to
make, 110 properties are sold.
Or in other words, currently, more properties are being sold or purchased than listed, contributing to
the imbalance between demand and supply.
High Demand for Stock Overall Stock Levels Down
SOURCE CoreLogic & SQM Research
THE CONTRIBUTING FACTORS
. According to leading agents, the
current levels of stock are largely due
to;
• Quieter Spring Selling Season in
2021 due to lock downs
• An increase in the duration of
average property ownership, most
likely driven by large upfront
transaction costs (stamp duty).
• An increased propensity to
renovate / improve an existing
home over purchasing another
home.
• An increase in off market
transactions (to almost 30% in
Sydney) whereby the property is
not marketed on typical channels
(REA & Domain).
SOURCE https://www.bencollierteam.com.au/market-insight
RATIONALE FOR NOT LISTING IN THIS MARKET
9/10 8/10 9/10
Being a Buyer in a Lender Timing and Having to Sell Before They
Sellers Market Credit Complexity Purchase
Owners are hesitant to sell The general timing to loan Owners perceive that they
their home, and become assessment can be over 4 need to sell a property
buyers in a low stock, high weeks, which can place before they buy, and line
demand environment. Due buyers at risk, particularly up settlement date to a
if they are attempting to sale, which can be
to a conception that they
purchase and settle a impossible in the current
will sell at a high price but
property simultaneously. market.
buy at a higher price.
HOW CAN BRIDGING FINANCE ASSIST?
OPTION TO BUY BEORE SELLING
Providing vendors with a financing option that OPTION
allows them to lock in a property purchase, and
then sell their existing property at a later date.
TIME TO PROPERTY MARKET
This allows a vendor to sell their existing TIMING
property in an orderly fashion, maximising their
exit price in a rising market.
SELL & LIST
This provides a unique opportunity for a real
TRANSACT
estate agent to sell a property, and position
themselves for another listing.
WHAT IS BRIDGING FINANCE?
Bridging finance allows a Vendor to buy their next home
. before they sell their current property. The bank
will provide 100% of the purchasing costs for the new purchase and give the Vendor 6 –12 months after
settlement date to sell their existing property.
During the period where the bank holds both properties (the property purchase, and the property not yet
sold) this is the “Bridge Period”. Once the existing property has been sold, the bank will control the sales
proceeds to pay down the bridging loan.
$1,500,000
$1,000,000
$500,000
$0
1 2 3
Existing Home New Home Debt Limit
Existing Home
$200,000
Loan Balance +
New Purchase
$600,000
Including Costs =
Peak Debt
$800,000
Interest Capitalised
_ Sell Existing Home
$400,000
Net Proceeds =
End Debt
$400,000
PRODUCT OPTIONS & CONSIDERATIONS
Does your lender charge a Most lenders will charge you a higher rate during the bridging
higher rate for the bridging period, however some of our lenders do not, which can
portion of your loan? significant reduce the cost of bridging a loan.
Do you need to make Some lenders will allow the interest on the bridging portion to
repayments on the bridging capitalise, and be paid out on sale of the existing property. This
loan portion? is beneficial for cash flow during the bridging period.
Does your lender allow you to Some lenders will allow you offset the bridging component of
use an offset account on the the loan, enabling flexibility and interest savings during the
bridging loan? bridging period.
Does your lender require you Some lenders need the borrow to show that serviceability is
to show that you can service evident on the Peak Debt amount, whereas others are only
the Peak Debt? focused on the Residual Debt (i.e. the home loan left over after
your property has sold).
Does your lender offer Some bridging finance lenders are quite uncompetitive once
competitive rates post-Bridge? you have finished the bridge period and no longer require the “
finance solution”
CONTACT US
At Catalyst, we’re passionate about building
enduring business partnerships. If you’d like
us to provide an update to your team or
1300 411 455
info@catalyst.com.au
assist clients with their options, then please
Level 5, 2 Bligh Street SYDNEY NSW 2000
contact one of our advisory team.
in /catalyst-australia
Adrian Lee Stephen Michaels Sean Wheatley
Chief Executive Officer Director Head of Partnerships
0457 777 777 0406 089 474 0409 272 727
adrian.lee@catalyst.com.au stephen.michaels@catalyst.com.au sean.wheatley@catalyst.com.au
Catalyst Advisers & Catalyst Debt Capital are Authorised Credit Representatives of Finsure Finance and Insurance, Australian
Credit Licence Number 384704. Catalyst Advice Pty Ltd ABN 61 612 246 634 is a Corporate Authorised Representative No.
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