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The banks continue to increase their exposures to commercial property, with actual exposures up 10 per cent, according to APRA.
The Australian Prudential Regulation Authority (APRA) has noted that the banks are continuing to lean into commercial property lending.
After releasing the Quarterly Authorised Deposit-taking Institution (ADI) Performance and the Quarterly ADI Property Exposure publications for the quarter ended 30 September 2022, the prudential regulator flagged that “commercial real estate lending has continued to grow strongly”.
The data showed that for the September quarter, commercial property limits increased by 9.5 per cent and actual exposures by 10.0 per cent compared to the same quarter last year.
Exposure limits were $417.1 billion in the September 2022 quarter, the data showed, whereas they had been hovering around $362 billion in the September 2021 quarter.
Actual exposures for land developments and subdivisions were among the fastest-growing commercial property segments for the year to September 2022, increasing 28.4 per cent compared to the September 2021 quarter.
This was followed by industrial that grew 18.9 per cent over the same period and continues the trend that started during the beginning of the COVID-19 pandemic.
Non-performing commercial property loans as a share of commercial property actual exposures remained unchanged from the previous quarter (June 2022) at 0.5 per cent.
Specific provisions as a share of non-performing commercial property exposures declined to 11.9 per cent in the September 2022 quarter, down from 13.1 per cent in the June 2022 quarter.
New resi lending falls from 2021 highs
While commercial property lending continues to grow, residential mortgages funded fell over the last quarter.
According to APRA, new residential mortgages funded in the September 2022 quarter dropped by 10 per cent compared to the same period the year prior, falling to $151 billion.
With this dropped on last year — and was tempered due to a swathe of cash rate target increases — it fell from abnormal highs seen during the pandemic. For example, it was still considerably above pre-pandemic levels, being 58.4 per cent over the September 2019 quarter.
A fall in owner-occupied lending outpaced that for investor lending, declining by 11.1 per cent and 7.9 per cent, respectively, in the September 2022 quarter when compared to the September 2021 quarter.
Around 68 per cent of new home loans were for owner-occupiers, with just under 30 per cent for investors. Interest-only lending remained relatively stable, increasing by 0.6 per cent in the September 2022 quarter compared to the previous June quarter. Interest-only loans as a share of residential mortgages outstanding were 11.1 per cent in the September 2022 quarter, unchanged from the June 2022 quarter.
For the September 2022 quarter, 17.1 per cent of total new mortgages had a debt-to-income (DTO) ratio that was more or equal to six (in volume terms), down substantially from 23.3 per cent in the same quarter last year and a reduction from the 22 per cent recorded in the June 2022 quarter.
New lending at high loan-to-valuation ratios (over 90 per cent) also declined, falling from 7.5 per cent in September 2021 to 6.2 per cent in September 2022.
The share of new loans with an LVR greater than or equal to 90 per cent was 6.2 per cent in the September 2022 quarter, down from 6.4 per cent in the June 2022 quarter, while the share of new loans with an LVR greater than or equal to 80 per cent declined to 30.5 per cent in the September 2022 quarter, down from 32.1 per cent in the June 2022 quarter.
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