Loan Market

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Experts say now may not be the best time to buy property, according to Finder, Australia’s most visited comparison site.  In this month’s <a href="https://finder.us9.list-manage.com/track/click?u=cc5e9bce699fa1d71a67cf499&amp;id=9834d9a8b8&amp;e=f2176dbcf8" target="_blank" rel="noopener noreferrer" data-auth="NotApplicable">Finder RBA Cash Rate Survey™</a> – the largest of its kind in Australia – 43 experts and economists weighed in on future cash rate moves and other issues related to the state of the Australian economy.  While all experts surveyed expect a cash rate hold in July (43/43), just one third of respondents (15, 35%) said that now is a good time to buy property.  Another third (13, 30%) believe that buyers should sit tight and wait for the property market to settle, while the others were unsure (15, 35%).
Cooke said recent reports have indicated that 1 in 10 apartment buyers who purchased off the plan are choosing to default on their loans.  ”This is the most shocking report I have seen since the onset of COVID-19. It is a huge decision to default, as it means losing your deposit." “There are two main things that would put a buyer in this position: either they’ve lost their job and can no longer afford the loan, or the property has dropped in value so far that the banks are not willing to issue funds." “Both are terrible positions to be in, and paint a truly dreary picture for our economic future as it’s only likely to get worse from here,” Cooke said. 
A Finder consumer survey from June of more than 1,000 Australians found that consumers feel more bullish than experts. More than half of (59%) believe now is a good time to buy property – a sentiment that hasn’t been shared by so many Aussies since months before the pandemic hit. Economic Sentiment Tracker  Finder’s Economic Sentiment Tracker gauges experts’ confidence in five key indicators: housing affordability, employment, wage growth, cost of living and household debt.  This month, positive sentiment about household debt improved slightly, while wage growth positivity stayed at 0% for the fourth consecutive month. Positive sentiment for housing affordability dropped from an all-time high of 59% in June 2020 back to 44% this month.  <img src="https://lh6.googleusercontent.com/GeqW5Pt2FDt5S5U6sPZwWpFyl3lqjmh0PxRbyPGU-LwmEwpgazPtCLZByxYdTIqrHMqEiqUXufPUWPc88DXsSr8r5J0HtKT9UwMScjY2AWy_hmXd285DE2uAEElyZytHwOjcaMo_" data-imagetype="External">
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1 in 10 off the plan apartment buyers choose to default: Finder.com.au

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Metrics anticipate the Australian commercial property loan market outlook for 2020.
Non-bank lender activity in the Australia property loan market is forecast to expand further in 2020, driven by increased interest from both developers as well as investors
The Australian non-bank loan market has been an essential source of funding for Australian property developers and investors for decades, but when compared to more developed markets such as the US and Europe, it still has significant potential for expansion.
There are currently a number of structural and cyclical trends playing out in the market that will see it grow in the coming years, notes the nation’s leading non-bank lender Metrics Credit Partners (Metrics).
Non-bank lenders to provide a greater share
One of the hallmarks of the Australian corporate lending market has been the bank dominance of the sector, with the domestic banks currently holding around 70% market share. Due to the large balance sheet capacity and accompanying capital required to operate in the market, barriers to entry are significant.
However, “banks are under significant regulatory pressure to reign in their loan portfolios to meet stricter capital requirements, which has opened up opportunities for non-bank lenders to claim a greater share of the &gt;$900 billion market." notes managing partner at Metrics, Andrew Lockhart.
“For this reason, expect the proportion of non-bank lenders to grow modestly over the coming year.”
Mr Lockhart adds that institutional capital is also driving this corporate loan growth. “The asset class is a key component in institutional portfolios, particularly for those seeking income-producing assets at a time of low yields, and over 80 per cent of managers expect to raise more capital from pension funds and insurance companies in the near future.
“Outside of the institutions, however, there is also significant interest in investing in corporate loans from Australian retail and self-managed superfund investors, drawn by the attractive risk-adjusted returns of four to ten per cent on offer.”
Given continued uncertainty for equities markets resulting from geopolitical issues and the ‘lower for longer’ rate environment impacting cash and term deposits, this is a trend expected to continue into 2020.
Mr Lockhart notes that raising capital for property developments can be a long and expensive process. “The property sector is an attractive opportunity to build a relationship with a lender, rather than relying on commoditised lending products offered by the banks.
“Given the pullback in bank funding in Australia, along with the appetite we are seeing from borrowers of all sizes for alternative sources of funding, we could well see more sizeable transactions in the Australian market in the years to come.”
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