Alpha First Newsletter – August 2022
Since our last newsletter in June, uncertainty fuelled by inflation and how long it is until it subsides both globally and locally continues to dominate property markets and the economic outlook.
Our view of the market
It is our view that the current climate will continue until at least the end of 2022, and certainly until inflation starts to retreat. Rising interest rates and other measures taken by central government would seem to be aggressive enough to contain inflation short term and start a downward trend toward the end of 2022. Hopefully that is the case which will bring a positive approach to businesses for 2023.
So what is happening at Alpha First?
We are being vigilant in respect of property value trends, however, the often-predicted large value drops have not come to pass, although drops in the Wellington region of 8% and 5% – 6% in Auckland are serious for a lot of builder/developers who started builds 9-12months ago and now find themselves in a loss situation. Rising interest rates and material supply and cost are having a major impact.
In Auckland, Alpha First loans are only 38% by number of loans, and 34% by value, both stats that we have deliberately reduced from approx. 50% over the past year. We have approx. 60% of our loans concentrated in regional New Zealand where borrowers tend to be more conservative in their approach, pre-sale commitments are easier to achieve, and there is less prospect of drastic property value impacts.
Across the country, values have not dropped below values of one year ago and so it is reasonable to assume that there is room for a further price drop over the next 6-12 months and so we are being conservative in our approach to new loans.
Nikki Wood has been appointed Manager Loans and Lending. Nikki joined our Omega Capital team in 2021 after being with Westpac bank for 25 years. Her experience and capability as a senior property financier and credit analyst on larger client transactions will be invaluable to Alpha First and we are very pleased to have her on board with Alpha.
Nikki will be managing all current loans and any issues that may arise during the loan term and communicating with loan investors assisted by Meghan Benjamin who investors already know.
New loan proposals will be vetted by Nikki in the first instance together with the writer, and she will have the responsibility of approving and settling all new loans. Just as it is now, the Directors, Scott and Olivia have oversight of all loan transactions and lending.
The past few months have been busy on the marketing and branding front. We’re currently working with King St, an advertising agency in Hamilton, on refreshing our Alpha First brand, including an updated logo, website, product information, and a fresh new branding campaign.
Your survey feedback was an invaluable resource that helped greatly in developing the creative and messaging – especially commentary by investors saying they enjoy trust, predictability, and certainty when working with us.
We’re planning to launch in September, so do keep an eye out for our new website, material, and marketing campaigns. Until then, here’s a sneak peek at our soon-to-be-released Alpha First Mortgage Investments logo. We hope you like it as much as we do.
As always, if you have any concerns in respect of the loans you have invested in, or wish to talk with us on any matter, please do not hesitate to call or email.
Scott Massey and Olivia Fraser
Note: Some investors may be a little frustrated at present with the opportunities to invest with us being a little slower to come to you than you have experienced in the past. However, this is due to our conservative approach to risk in the current market. On the flip side, we have increased our interest rate to borrowers and are averaging over 9% returns this year.