Gary Palmer,CEO of Paragon Lending Solutions.
Recent property figures released indicate that interest in buying high valued properties priced between R4 and R10 million has increased significantly in 2015 when compared to 2014, despite signs of the market slowing down.
According to Gary Palmer, CEO of Paragon Lending Solutions, as the demand for these properties continues to increase, so does the number of property investors approaching non-bank lenders to secure capital for large property transactions. Palmer says that the residential property market seems to be improving, with an increased number of buyers looking to enter the market and invest in property. “We are currently experiencing a ‘sellers’ market’, as there is currently an influx of potential buyers ready and willing to purchase property”.
“As there is currently an increased number of buyers present in the market, sellers have various offers to choose from, and potential buyers therefore need to secure the transaction as soon as possible. Due to the short turnaround time, we are finding that buyers are approaching alternative lenders to secure capital instead of traditional bank lenders, as they do not need to comply with the strict lending criteria or lengthy approval periods. Further, the approval rate on loan applications for smaller transactions is decreasing, as the banks are currently focusing on funding larger transactions”.
Palmer says that as the residential property market improves compared to the 2014, and despite signs that it may slow down, the need for clients to secure capital in short periods of time will continue. “Due to the regulation that banks need to comply with, they are often unable to provide financing in a couple of days, and the buyer approaches a non-bank lender instead. As high-net-worth individuals have about 35%-40% of their assets held up in property, they can make use of the property as surety to secure funding in a couple of days through an alternative lender.”
He says that as the residential property market is only in the beginning of its recovery, now is the time for investors and buyers to act. “The market is currently offering buyers a good opportunity, although traditional banks are likely to remain conservative.”
Palmer notes that when it comes to property transactions, the seller often puts pressure on the potential buyer to secure the deal as quickly as possible. “As the property market improves, sellers will increase the pressure as the number of potential buyers are on the increase. Buyers can therefore not afford to take their time when trying to secure a transaction”.
“As the market improves, the more agile buyers will need to be when securing property transactions. In order to assist clients secure these transactions in the current marketplace we have streamlined our processes in such a way that we are able to approve loans within 24 hours and deposit the capital into the client’s account within a week,” concludes Palmer.