Fears of persistent commercial lending challenges: NAB

NAB’s Q2 2023 Commercial Property Survey revealed commercial property market sentiment and confidence have moderated in Q2 2023, following a period of growth in 2022.

The survey, which included 350 property professionals, indicated a notable slowdown in activity, with signs that the growth rate has sharply decreased.

Coupled with rising interest rates, the risks to further growth have heightened, leading to a decline in overall commercial property confidence levels, which fell 3 points to 11 points.

The short-term confidence levels remain relatively higher for property professionals operating in CBD hotels and industrial property markets, with scores of +25 pts and +22 pts, respectively.

On the other hand, the office sector recorded the lowest short-term confidence level at -18 pts. In terms of longer-term confidence levels, industrial property leads with +30 pts, followed by office (+10 pts) and retail (+3 pts).

One of the major concerns highlighted in the survey is the increasing difficulty in obtaining debt.

NAB’s chief economist, Alan Oster, emphasised that a significant number of property professionals reported that it has become harder to obtain borrowing or loans compared to the previous quarter.

“The net number who said it was harder to obtain borrowing or loans (debt) improved a little but remained elevated at -34 per cent, down from -37 per cent in Q1 but significantly higher than at the same time last year (-20 per cent),” he said.

“Looking ahead to the next three to six months, more property professionals believe debt funding conditions will be worse than now (-37 per cent), with the net number expecting equity funding conditions to be worse also higher (-31 per cent).”

The combination of economic uncertainty, higher interest rates, and a potential slowdown in construction activity poses significant hurdles for the commercial property market in the coming months, he said.

Broker opportunity in the industrial sector

Despite these challenges in the property market, there is a silver lining in the industrial property sector, where there are still reported shortages and strong demand.

The survey revealed that an above-average 18 per cent of developers are considering starting new projects in this sector.

NAB head of behavioural and industry economics Dean Pearson said that the sector has demonstrated resilience, boasting low vacancy rates and rising rents, making it an attractive investment option.

“Brokers are there for their customers every day, helping people from first home buyers to investors to empty-nesters, to get the best outcomes for their home and commercial lending needs,” Mr Pearson said.

“In today’s evolving property market, brokers are well positioned to provide guidance to buyers on securing a loan that will help them to achieve their goals. This report confirms NAB’s commitment – as the bank behind the broker – to supporting brokers every step of the way.”

[Related:Hybrid work weighs on Australia's commercial property market]

Kate Aubrey is the senior content producer of Momentum Media's mortgages titles: The Adviser and Mortgage Business.

Prior to joining Momentum Media, Kate covered regional and breaking news for ABC Radio for more than three years.

She has a Master of Arts in Journalism from the University of Melbourne and a Bachelor of International Business and Business Management from Griffith University.

Email Kate at: This email address is being protected from spambots. You need JavaScript enabled to view it.