How to Ride the Highs and Lows of Property Development With the Right Support?

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MARKET INSIGHTS

April 2nd, 2024

Property development, like many ventures, has its ups and downs. When a project comes together, the financial rewards and satisfaction make it feel like you’re on top of the world. But, during the very same project, market shifts, capital challenges, and rising interest rates bring volatility.

As a result, every developer will enjoy prosperous days and navigate challenging ones. The good news is, there is a way to make this ride smoother. The key lies in having the right support by your side.

The highs of property development.

As trusted project partners, we know there are multiple wins in the property development game. When we sit down and explore a potential project, these are the three most common highs our borrowers are chasing (and what we help them get).

1. Financial gain.

The most obvious advantage is the potential for profit. Successful property developments can result in significant returns on investment, especially if market conditions are favourable and the development process runs smoothly.

2. Business expansion & industry reputation.

Successful projects turn heads; you’re building a reputation and growing your business with each standout development. Additionally, catching a trend early on, like the rise of sustainable buildings and development processes, and capitalising on it can put you at the forefront of industry innovations.

3. Community impact.

Transforming an empty plot of land or a dilapidated building into a vibrant community, functional commercial space, or modern residence is something worth bragging about. It’s one way developers make a positive impact on the community and improve local lives.

Man, woman wearing hardhats converse.
Man, woman wearing hardhats converse.

But, the game is changing…

While the highs paint a rosy picture of property development, the industry also comes with its set of challenges — the dreaded “lows”. In our experience, complications and setbacks in the development process usually stem from three areas.

1. Sourcing capital.

Right now, capital is drying up. As a result, big lenders are pulling back — they don’t have the money they need and aren’t able to get it. So, they preserve what money they do have by giving it to a select few existing clients. The “existing clients” play makes it impossible for new borrowers to partner with big lenders.

2. Shorter property cycles.

A property cycle has four phases — Boom, Stability, Bust, and Recovery — which are influenced by economic, social, and political factors. In the past, a single cycle would last about seven years. However, Perth has seen about four cycles in the last 10 years. For a property developer, these shorter cycles can affect project duration, impose planning challenges, create cash flow issues, and reduce profit margins.

3. Interest rates & cost pressures.

Rising interest rates mean that the appetite in the market is changing quite rapidly. This, paired with cost pressures (usually in the form of supply-chain issues) impacts the feasibility of a project and reduces profitability. This doesn’t mean it’s a “bad project”, it’s just one of the realities of the season the industry is in (but not all lenders see it that way).

A group of men in black suit sitting near the table while having conversation.
A group of men in black suit sitting near the table while having conversation.

With the right support, the highs are higher and lows aren’t quite as low.

Knowing what the highs are is one thing. Enjoying them? That’s another story. While some benefits might come pretty easily, they’re even more achievable and rewarding with the right support. Similarly, knowing how to navigate the lows when they hit (or ideally, mitigating them before they get a chance to), is key to project success.

That’s where we come in…

You have the vision. We’ve got the capital.

As progressive funding partners, we’re nimble enough and small enough to take on new opportunities, which makes us incredibly accessible. Plus, with a deep pool of quality investors, our capital isn’t running dry.

This means our door is always open to new clients — especially those with lofty ambitions. We’re not looking for clients who have built 20 apartments before we give them money for 20 apartments… If we think your “why” makes sense, you have proven experience, and there’s a market for what you want to bring to the table, you’re in. We’ll partner with you.

We know the industry.

Bowery understands the different changes and challenges in the market. We know how interest rates affect a project, we’re realistic about how cost pressures impact profitability, and we’re across immediate and projected property cycles so we’re never caught off-guard.

Long story short, we understand what it takes to get a project across the line. Having a partner that can help you manoeuvre around risks can be the make or break of a project.

We offer flexible funding that aligns with your priorities.

Unlike banks, we don’t just throw cash at you at the start and then reappear at the end. The Bowery Capital team provides support throughout your project — and we pride ourselves on our flexibility. When challenges arise, we adapt so we can continue supporting you. And, we do it without moving the goalposts.

Finally, a partner that sees the big picture.

Choose a private lender that sees the big picture. We see the highs and the lows of property development, and we’re here for every moment.
Let’s talk about your project — book in a meeting to get started.

Let’s do this.

You didn’t come here by chance.
You came here because you wanted to invest in your future. So, why wait?

Whether it was to invest or borrow, let’s take this first step together.

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