Development finance starting to flow more freely

Business lending has grown by 0.4% based on the latest stats issued by the Reserve Bank. Business finance lending showed some tentative growth in February 2010 after a consistent month on month declines that started back in November 2007.

The annual trend is clearly improving, which suggests that banks may finally be starting to loosen the purse strings on business-related finance.

The 0.4% gain in May 2010 is still half of the five-year average (0.8% growth month on month), but this slight improvement is a sign that the finance sector is becoming less risk averse.

The improvement in finance conditions will be welcome news for property developers, especially the medium and high density development sector, who have found securing development finance difficult after the GFC. Banks have been asking developers to secure 100% pre-commitment on unit sales before they will approve finance - a condition that significantly erodes buyer confidence when considering an off the plan purchase.