Private credit sees opportunity in Australia real estate as banks hesitate
SYDNEY - Private credit lenders are increasing their footprint in parts of the Australian commercial property market, providing alternatives for borrowers as banks scale back higher-risk lending amid a slowdown brought on by elevated interest rates.
U.S.-based PGIM Real Estate expects to deploy a further $1 billion in the country over the next few years, said its head of Australian real estate Steve Bulloch. The juicy returns mean higher costs for borrowers, with the RBA in March putting the spread over a major bank loan at about 200 basis points for business loans of all types.
New commercial property lending by the four major banks has averaged 1% growth per quarter since June 2022, levels last seen during the pandemic, data from the prudential regulator shows, with exposure to offices and residential contracting. For build-to-rent residential projects, banks hesitate to lend more than 40% to 45% against a project's value, while private lenders could go as high as 65%, Barings' Notaras said.
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