- According to Stamford Capital, a thriving real estate market has fuelled an influx of new non-bank and private lenders into the real estate debt space
- When it surveyed lenders in the midst of COVID (June 2020), almost one-third of respondents said they planned to decrease leverage levels due to market conditions. That’s dropped right back to just six per cent in the new survey
- Meanwhile, 82 per cent expect to increase the size of their loan book in 2021
- The survey found that there is little expectation foreign banks will increase activity in Australia, with 34 per cent saying foreign banks and financial institutions might increase commercial investment lending
- Respondents were optimistic about the booming residential and industrial markets, but less so on retail and commercial spaces
According to Stamford Capital, a thriving real estate market has fuelled an influx of new non-bank and private lenders into the real estate debt space.
“I think this year is going to be as interesting as real estate can get. I’ve never seen so many lenders operate in the market,” Stamford Capital joint Managing Director Michael Hynes said.
“With easier presales, banks are materially more affordable and there’s a capital-savvy combination emerging with mezzanine debt.”
In March 2021, Stamford Capital surveyed over 100 banks, non-banks, private lenders, family offices and foreign banks to gather their perspectives to track lending sentiment.
In their Real Estate Debt Capital Markets Survey 2021, Stamford Capital found that the “survey respondents seem overwhelmingly optimistic”.
When it surveyed lenders in the midst of COVID (June 2020), almost one-third of respondents said they planned to decrease leverage levels due to market conditions. That’s dropped right back to just six per cent in the new survey.
Meanwhile, 82 per cent expect to increase the size of their loan book in 2021.
Lending appetites are back in line with pre-COVID levels, according to the survey.
The report found that two-thirds expect non-banks to increase construction lending activity, up from 42 per cent in June 2020, and 71 per cent expect them to increase commercial investment lending.
However, just under half expect major banks to grow their construction loan books in 2021, and 56 per cent expect major banks to increase commercial investment loans.
The survey found that there is little expectation foreign banks will increase activity in Australia, with 34 per cent saying foreign banks and financial institutions might increase commercial investment lending. That number was at 50 per cent pre-COVID.
This year, only 28 per cent expect foreign banks to increase construction lending activity.
The report also found that non-banks are expected to decrease margins as pricing gets competitive.
71 per cent of lenders in the survey expect non-banks to increase activity in the investment loan market, however, 40 per cent also believe they will decrease investment margins, and 41 per cent expect them to decrease construction margins. On top of this, 48 per cent expect APRA to increase non-bank oversight.
“There is still such a gap between where the non-banks and banks play, and the non-banks have to close that gap to attract some of those customers,” Hynes said.
“There’s only so much premium they will pay for better leverage in this market.”
The report said despite pockets of concern, there are signs of optimism across all markets.
Respondents were optimistic about the booming residential and industrial markets, but less so on retail and commercial spaces.
“There will be future opportunities for investors willing to take on some risk, to reposition and create upside,” Hynes said.
“That’s not an easy thing to do in some sectors like commercial office – it’s not for the faint-hearted.”