Major banks’ ‘weakened appetite’ for commercial investments will continue: HoldenCAPITAL

From 2015 to the first quarter of 2017, the proportion of loans HoldenCAPITAL directed to the major banks plummeted from 67 per cent to 20 per cent. Mr Holden attributed the sharp decline to ongoing regulatory controls on investment and real estate development lending since 2015. 

Reflecting on the changing landscape, he argued that the banks’ role is to “grease the wheels” of the economy and not necessarily engage in higher risk lending: “The banks shouldn’t be playing in that space in a massive way,” he said.

“The banks have retracted quite heavily since November 2015, so we’ve had to get creative with where we find money from and how we structure deals to make it attractive for investors and lenders to participate,” he told The Adviser.

“Previously, if a bank was able to do $3 billion in real estate development, it’s now been culled quite dramatically so while those projects still make sense [and] they still have merit… with the banks not as active, it becomes a case of having to find other sources of capital.”

That’s where the specialised lenders come in, he said, arguing that brokers and developers should be looking to specialised lenders with specifically structured loan programs to take on the risk of property development. While painful for developers trying to fund projects in a difficult market it may be, overall it presents a “better outcome” he says.

For brokers, succeeding in the shifting landscape comes down to being active and seeking out new lenders: “It’s very easy to be complacent and to believe that the banks will be there to do a deal at some level but it comes down to expanding your lender space,” he says.

“You need to have multiple solutions so that you can actually confidently take on a transaction and know that you’re going to get an outcome.”

[Related: Commercial clients want banks to leave them alone: brokers]