With banks pumping billions of dollars into the commercial property sector, Westpac and ANZ Bank are taking the lead in increasing their lending practices. There has been little growth in business lending and commercial property is one area outside of the residential housing market where demand is strong.
According to the latest figures, the major Australian banks have $195.6 billion in exposure to the sector. There is currently an influx of capital as investors are seeking out higher levels of returns in an environment where low interest rates abound.
UBS banking analysts have found that Westpac has led the rebound of commercial property lending. During 2014, the Bank has increased its exposure by 11.1 per to date. ANZ has been pursuing NAB’s business customers and has expanded its commercial property exposure by 9.3 per cent during the past full year.
National Australia Bank, the country’s biggest business bank, expanded its exposure only slightly – it grew by 0.5 per cent excluding its loan book from the UK.
Analysts have said that investors should be “alert, but not alarmed” by the increase in commercial property lending, which has traditionally been much riskier for the banks than providing residential mortgage financing.
This trend was not necessarily a problem, but if lending standards started to slip, commercial real estate may start to become an issue for the big banks again.
