Banks pulling back from commercial property sector

The Property Council of Australia has warned that foreign banks are pulling out of Australia’s commercial property sector, potentially putting hundreds of projects at risk.

According to The Australian, the Property Council has sent a briefing document to federal political parties warning there is “clear evidence that foreign financiers are leaving the Australian market at an accelerating pace”.

The document includes the results of a survey of Property Council members showing 23 foreign banks have already withdrawn funding or are at risk of reducing their exposure to Australian commercial property funding.

“Foreign banks are already refusing to roll over their finance,” the document says. “There is evidence that they are exiting syndicates of well-run Australian property businesses and tenanted properties.”

But it is not just the foreign banks pulling back. Australian banks, including ANZ and Westpac, are looking hard at their exposure to the sector.

According to estimates from UBS, Westpac has more than $69 billion in commercial property-related loans, ANZ has $67 billion, CBA $47 billion and NAB $37 billion.

Westpac chief executive Gail Kelly told The Australian Financial Review that the bank has a “fairly concentrated” position in the sector.

“So we’re not looking to bring on any more commercial property exposure within the Westpac Group, and of course with our merger with St George, St George also had a significant piece of its commercial lending in commercial property…in fact, over time, we’d like to reduce that concentration.”

The news is likely to put further pressure on the Federal Government’s Rudd Bank proposal, which aims to help property companies hit by the withdrawal of foreign lending support.

The big four banks will commit $500 million each to the Rudd Bank vehicle, while the Government will contribute $2 billion.

But the Opposition has some issues with the proposal and leader Malcolm Turnbull has not said whether he will approve it.

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