Photographer: Brendon Thorne/Bloomberg

Aussie Property Boom Spurs Real Estate Loans Luring Asian Banks

  • Property-related loans in Australia climb to four-year high
  • Increasing number of deals bringing in larger group of banks

Australian real estate loans are bucking a slump in the syndicated lending market and have nearly quadrupled in 2016 from last year, buoyed by continuing demand for residential and commercial assets. Asian banks are taking notice.

Fifteen syndicated loan deals for constructions, land development and property acquisitions worth $3.37 billion were signed so far this year, the highest volume since at least 2013. At least six additional transactions totaling about A$2.4 billion ($1.8 billion) are in the pipeline.

Australian property prices have been spurred by monetary easing from the central bank, a growing population and increasing amounts of Chinese money entering the market in recent years. The gains in real estate syndicated lending come as local banks are reducing their commitments in what has traditionally been a domestic market as they brace for tougher capital requirements under new banking rules.

Property-Related Loan Volume Surges to Four-Year High in Australia

Source: Data compiled by Bloomberg

By contrast, year-to-date total loan volume in the country declined 22 percent to A$89.4 billion from 2015, and is poised to reach a six-year low. The decline is partly due to a 58-per-cent year-on-year decline in project financing, triggered by the rout in commodity prices earlier this year. 

The strong demand for property assets in Australia shows no sign of abating, with $5.2 billion worth of acquisitions for property and real estate investment trusts in the works and deals totaling $4.5 billion having been proposed, according to Bloomberg data.

Foreign lenders are increasing their market share in Australian syndicated property loans as local player curtail exposures. The Australian Prudential Regulation Authority urged banks in 2014 to limit their annual growth in investor mortgages and asked them last year to tighten mortgage-lending standards amid a surge in home prices.

Gallant Finance’s A$432 million 4-year loan backing Blackstone Private Equity’s acquisition of a portfolio of industrial properties from Goodman Group drew 11 banks in September, with Taiwanese lenders holding 42 percent of the facility and Chinese banks 29 percent. Walker Corporation got A$1.05 billion 5- year loan for commercial property development in Melbourne from 20 banks in August with the two Australian banks arranging the facility distributing 81 percent of the deal to overseas banks. Korean, Chinese, Singapore and Taiwanese investors helped fund the deal.

Related stories:
Oct. 5: Asia project finance lags 2015 on Australia/NZ slump
Oct. 28: Growing pool of lenders to curb upward pricing pressure in Australia
Sept. 2: Foreign banks boost funding of Aussie “apartment boom,” UBS says
July 1: Aussie banks cut local lending, infra deals to boost 2H volumes
Jan. 29: Intl banks may get more lending chances as AU peers commit less

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