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Australia’s major banks have offered their insight into all aspects of the future of Australian real estate in a new report.
The Real Estate Debt Capital Markets Survey from Stamford Capital has revealed that a vast majority of major banks are expecting to pull back their construction lending in 2022, with 39 per cent opting to maintain their current levels, while 29 per cent will decrease these types of loans as the sector reels from supply chain issues induced, inflation, labour shortages and flood damage in northern NSW and South-East Queensland.
However, this lending gap will be plugged by non-banks, with nearly two-thirds (62 per cent) forecasting increased investment into construction lending for the year, as these institutes are “less risk-averse and ready to pounce on the opportunity left by the big banks”, the report outlined.
Additionally, the report also detailed how lenders view the trajectory of both the industrial and residential real estate markets. As 2022 enters its second half, 65 per cent of respondents stated that they felt the industrial real estate industry, driven by two years of considerable growth as demand for warehousing and logistics ballooned during the pandemic, is nearing the peak of its cycle.
Michael Hynes, joint managing director at Stamford Capital, said the sector was lucrative to lenders due to its high certainty of income.
“Everyone loves certainty of income profile, and industrial currently seems to have it better than most. It’s very much an institutionally led market, and the certainty of planning demand, big sheds, and big tenants make it attractive,” he said.
The survey also revealed that nearly 42 per cent of lenders believed residential development is approaching its peak, while slightly more than half (51 per cent) felt the housing market will peak.
The report stipulated that the three main areas of concern for lenders were “ageing and sub-regional retail assets suffering from online sales and less tourism; residential developments at the mercy of labour shortages, supply chain issues couple with material cost surges and B and C grade commercial office stock, impacted by CBD office market contraction, hybrid working styles and shifts in tenant demand masked by incentives”.
“2022 is going to be a wild ride with rates forecast to rise further, non-banks continuing to grow market share and a number of property sectors, including residential and industrial, earmarked to be nearing their peak in the cycle,” Mr Hynes concluded.
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