Loan-to-value ratios (LVRs) employed by Australia’s larger non-bank lenders when advancing funds to property developers have fallen from a high of 72% in 2017 to an average of 65%, according to law firm Ashurst. Whereas the major banks have also reduced their exposure to residential apartment developers by more than half over the past three years. From The AFR:
The more conservative metrics being deployed by the growing pool of non-bank lenders could assuage potential concerns over the amount of financial risk entering the property sector as the reach of the shadow bankers grows…
The Ashurst analysis shows the big four banks reduced their exposure to residential apartment development by more than half in the past three years, from $5.2 billion at the end of 2016 to $2.3 billion in the middle of this year amid concerns around over-supply and the declining property market.
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
