A mounting residential slowdown and major tax changes are nudging more residential brokers towards commercial deals.
Mortgage brokers have said that a weaker residential pipeline and looming changes to negative gearing and capital gains tax have accelerated their shift into commercial lending, reshaping the types of clients they serve and how they source business.
Budget shock pushes investors towards commercial
Nick Lissikatos, director of Trelos Finance, said the turning point came directly after the federal budget, when conversations with longstanding clients began to shift.
“I think we saw the change pretty quickly after the budget, volumes started to drop off, and then just the change in customer sentiment that we were picking up,” he said.
He said clients unsettled by the government’s tax reforms and weaker housing demand started asking what else they could do with their capital, just as new lending data began to show a clear slide in mortgage activity.
“When we asked what they were thinking of instead, a lot of them were coming back to us considering commercial. Specifically commercial is where the customer sentiment seems to be going or leaning towards,” he said.
Meanwhile, Ali Mehboob, director of Noor Finance, said he was experiencing a similar trend, following the budget’s impacts on reducing investor borrowing and winding back tax-related lending concessions.
“After the budget, there has been a lot of focus on commercial lending, particularly because when we look at the budget changes, there’s been impact on the investor clients and the borrowing capacity, and also negative gearing, but not much has changed in the commercial space,” he said.
Warehouses, mixed‑use, and SMSF deals dominate
Lissikatos said the live opportunities in his pipeline ranged from small shops to industrial sheds, with warehousing emerging as the standout.
“The biggest ones we’re seeing at the moment are a combination of retail space, that’s corner shops, mixed use, a lot of commercial dwellings at the bottom, and then some residential on top,” he said.
“The biggest one at the moment is warehousing, we’re seeing a huge spike in demand for warehousing.”
Mehboob, by contrast, said he was seeing significant traction in superannuation‑backed commercial purchases.
“At the moment I’m seeing quite a lot of SMSF commercial lending happening and I’m helping some of my clients in the Sharia SMSF space as well,” he said.
“There is more demand for it due to not being impacted by the budget.”
He said that business‑use property was also gaining prominence.
“Some of the other examples of commercial lending have been where the builders have come to us for a warehouse, and we help them with connecting them to the right lenders,” Mehboob said.
Brokers utilising existing client relationships and referral networks
Lissikatos said his current commercial borrowers were overwhelmingly drawn from his existing investor base.
“Mainly at the moment it’s our existing clients who are seasoned investors, ones who have been doing this for many years,” he said.
“They are now starting to understand commercial, and a lot of that is coming from online.”
Lissikatos said he was reshaping his online marketing to match the growing curiosity.
“We’ve just updated our next newsletter for July, our July edition is going to include a lot on commercial, and our paid ads are switching on in the next week for commercial as well,” he said.
Mehboob, meanwhile, said he was leaning heavily on professional referral partners.
“These clients for SMSF, most of them are coming through buyer agents and accountants,” he said.
“So once the buyer agent has a conversation, they are helping their clients in super innovation – the first step is they come to us and they want to know the borrowing capacity before they actually set up the trustee.”
He said serviceability work had become a key determining factor as to whether clients went ahead and incurred the cost of trust deeds and legal advice.
New rules of engagement for security and skills
Lissikatos said one of the biggest adjustments was realising that, unlike in residential, where most types of property receive similar policy treatment, commercial lending is far more sensitive to what is used as security.
“In resi property, the security itself generally doesn’t make a difference, whether a client’s purchasing an apartment, a house, a town house, the policy or the surrounding of lending is generally the same, whereas the commercial space is completely different,” he said.
“It’s very driven on the type of security that you’re working with. So, understanding what that means, as in which lenders treat certain securities more favourably, what other conditions may be applicable based on the security, is very important in the commercial space.”
Mehboob said the learning curve had been steep but manageable and added that he had been attending industry events to build his knowledge.
“I’m finding myself learning something new every day, and the way I do that is I go to the different events, such as the events the MFAA are doing on commercial lending,” he said.
“The other starting point is actually going to tier two and tier three lenders who don’t have a requirement that you need to be writing commercial deals to become a commercially accredited broker.”
[Related: CBA tips major investor pivot after tax overhaul]
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