Businesses and commercial property investors will have to come to terms with a new commercial finance landscape.
That’s one of the key findings from a CBRE Research survey of 33 lenders – a mix of local banks, international banks and non-bank lenders – to the Australian commercial real estate sector.
Lenders expect interest rates to rise and for their margins to increase. “Collectively, this will put more pressure on serviceability / interest coverage ratio,” according to CBRE Research.
The survey also found that over 80% of banks have an appetite for loans with an LVR of 40-60%, with non-banks willing to accept over 60%.
“But the majority now require at least a part of the credit to be hedged. In fact, a quarter require at least 50% of the loan value hedged.”
Banks have mixed appetite for loans
For the final quarter of the 2022 calendar year, 36% of lenders forecast their appetite for new loans would increase, 15% said it would decrease and 48% that it would remain flat.
But lenders have different levels of interest in different asset classes, as they feel overexposed to some and underexposed to others.
Lenders felt they were “underweight” in the industrial and residential-to-rent sectors, but “overweight” with office, residential-to-sell, retail and alternatives.
“Transaction volumes are currently subdued while the market debates asset prices,” according to CBRE Research.
“Nonetheless, we see continued appetite from domestic banks and alternative lenders for quality sponsors with track record, sound assets and a clear asset management strategy. We have also seen increased enquiry on green and sustainability-linked loan product.”
I work with a range of lenders, so whether you’re a business or a commercial property investor, I can help you finance your purchase. Reach out to discuss your scenario.
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