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Aussie property boom spurs real estate loans luring Asian banks

Thursday, December 15, 2016 - 11:23

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Australian real estate loans are bucking a slump in the syndicated lending market and have nearly quadrupled in 2016 from last year, buoyed by continuing demand for residential and commercial assets.

[SYDNEY] Australian real estate loans are bucking a slump in the syndicated lending market and have nearly quadrupled in 2016 from last year, buoyed by continuing demand for residential and commercial assets. Asian banks are taking notice.

Fifteen syndicated loan deals for constructions, land development and property acquisitions worth US$3.37 billion were signed so far this year, the highest volume since at least 2013. At least six additional transactions totaling about A$2.4 billion (S$2.6 billion) are in the pipeline.

Australian property prices have been spurred by monetary easing from the central bank, a growing population and increasing amounts of Chinese money entering the market in recent years. The gains in real estate syndicated lending come as local banks are reducing their commitments in what has traditionally been a domestic market as they brace for tougher capital requirements under new banking rules.

By contrast, year-to-date total loan volume in the country declined 22 per cent to A$89.4 billion from 2015, and is poised to reach a six-year low. The decline is partly due to a 58-per-cent year-on-year decline in project financing, triggered by the rout in commodity prices earlier this year.  The strong demand for property assets in Australia shows no sign of abating, with US$5.2 billion worth of acquisitions for property and real estate investment trusts in the works and deals totalling US$4.5 billion having been proposed, according to Bloomberg data.

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Foreign lenders are increasing their market share in Australian syndicated property loans as local player curtail exposures. The Australian Prudential Regulation Authority urged banks in 2014 to limit their annual growth in investor mortgages and asked them last year to tighten mortgage-lending standards amid a surge in home prices.

Gallant Finance's A$432 million 4-year loan backing Blackstone Private Equity's acquisition of a portfolio of industrial properties from Goodman Group drew 11 banks in September, with Taiwanese lenders holding 42 per cent of the facility and Chinese banks 29 per cent.

Walker Corporation got A$1.05 billion 5-year loan for commercial property development in Melbourne from 20 banks in August with the two Australian banks arranging the facility distributing 81 per cent of the deal to overseas banks.

Korean, Chinese, Singapore and Taiwanese investors helped fund the deal.

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