Report | Intelligent Investment
Australian Lenders Sentiment Survey H2 2023
November 22, 2023 5 Minute Read
CBRE’s H2 2023 Lenders Sentiment survey finds:
- Lender investment preference continues to be dominated in the Industrial & Logistics sector, followed by Residential. Lenders have increased their caution towards Office.
- Appetite for new loans over the next three months is flattish for the majority of lenders.
- For new developments, there is a sizable bifurcation on pre-commitment and pre-sales by asset class:
- Almost no pre-lease required for Industrial lending
- >60% pre-lease required for Office assets by most respondents
- Largest cohort of lenders require 80%-100% of debt funding covered by pre-sales for Residential
- The cost of debt, influenced by the official cash rate and bank bill swap rates (BBSW) remains at elevated levels. Official forecasts and surveyed lenders expressed no clear consensus view as to whether rates have peaked, and their expected trajectory over the next 12 months.
- Credit margin expectations normalised following H1 2023’s survey, with 95% of respondents in H2 2023 expecting <20bps movement in credit spreads over the next 3-months.
- A slight increase in hedging requirements, presumably in response to recent interest rate volatility
- Preferred LVR requirements remained stable around 40-60% but this may come under pressure as assets are revalued in the next 6 months
- ICR requirement of 1.5x for new investment grade lending remains a preferred metric amongst lenders. There has been an uptick in respondents requiring a 1.35x ICR to support new deals.