High construction costs top the list of concerns for Australian property lenders

Elevated construction costs have been cited as the single biggest challenge for Australian property lenders in 2026 according to a new CBRE survey.

CBRE Research tapped a mix of local and international banks and non-bank lenders for its H2 2025 Lender Sentiment Survey.

The results highlight that the appetite for new loans remains positive, with 50% of lenders wanting to grow commercial real estate exposures and only 5% of surveyed lenders intending to decrease their book.

However, lenders are keeping a close eye on development feasibility challenges as construction costs remain persistently high.

CBRE’s Managing Director of Debt & Structured Finance Andrew McCasker said, “Feasibility challenges are evident across all major markets and sectors. This is impacting supply pipelines and has been noted as the single most important challenge facing the lending environment in 2026.”

Consistent with this, lenders cited uncertainty around future property values as their second biggest concern.

“As markets begin to enter this new phase of subdued supply, we expect many existing assets to experience significant tailwinds, although the speed and strength of this cycle is not yet clear,” Mr McCasker noted.

The survey highlights that industrial & logistics remains the most preferred lender asset class - by a considerable margin - followed by build to sell.

However, in a notable shift, lender interest in data centres has continued to wane.

CBRE Debt & Structure Finance Director Will Edwards said, “Rising complexity in the development and operation of data centres assets had led to this decline in interest, and while structural tailwinds for the sector are strong, heightened competition has prompted many investors to adopt a more cautious stance.”
Lender preferred asset class for new investment (top two responses)

Lender preferred asset class for new investment (top two responses)

 


Source: CBRE Research

Other survey takeaways include: 

• Australia’s cash rate cutting cycle is likely nearing its end, with 80% of local lenders expecting at most one more 25bps rate cut, consistent with domestic bank views.

• Credit margins have shown strong signs of stabilisation, with 80% of lenders expecting flattish margin movement over the next three months.

• Hedging requirements remain at low levels, with 60% of lenders having an interest rate hedging requirement between 0-25%, down slightly from 68% in H1 2025.