For property investors, 2015 has been marked by the Australian Prudential Regulatory Authority (APRA) forcing banks to become more cautious on lending on residential investment properties.
For markets such as Sydney and Melbourne, this is probably drawing this growth period to a halt. However, there is one investment sector where the banks are making it easier to borrow money. Commercial property does not get the media attention that residential property enjoys, yet it is very much the centre of the banks’ growth focus.
The graph below shows how residential investment lending has enjoyed a rapid growth, but is now tapering off. It also shows that business lending has and continues to enjoy a growth phase.
Commercial lending is more sophisticated than residential lending, which means that the lending teams are more comfortable with sophisticated structures. Good brokers have access to business bankers with whom they can arrange loans – something that someone cannot do by just walking into their local branch.
And because commercial lending is more sophisticated than residential lending, the banks are more comfortable lending to companies, trusts and PITs.®
The C&N Finance team are adept at arranging finance on a number of commercial properties. They have included (amongst others);
• Car parks
• Petrol stations
• Medical premises
Because the banks are being more aggressive in this space, rates are also more competitive. In 2010, commercial lending rates were around two per cent higher than residential rates – now they are almost the same.
As the economy continues to adapt to the wind down of the mining sector, the government is looking to stimulate other sectors of the economy. As a result, finance for commercial investing will be relatively easy for some time.
Graeme Salt – National Client Finance Manager – Chan & Naylor Australia Finance
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.