Non-Bank Lenders, Tech Start-Ups Gain Market Share in Development Lending

A recent report into property market trends and lending sentiment has found that a tightening credit environment is pushing the sector towards alternate forms of property finance.

The Real Estate Debt Capital study report by Stamford Capital surveyed 100 industry professionals from major trading banks, non-bank lenders and private financiers.

Respondents found that 40 per cent of participants expect major banks to further tighten lending criteria in the wake of the royal commission.

In response to flattening property markets and subdued appetite from the "big four", alternate funding sources such as non-bank lenders, foreign lenders and new technology platforms continue to gain market share.

Related reading: APRA Scraps Investor Loan Growth Cap

According to the report, non-bank lending has spiked in the wake of a series of APRA changes over previous years which has required major banks to impose greater restraint on their lending habits.

“This has significantly impacted the ability of smaller independent developers to get projects off the ground,” Stamford Capital executive director Michael Hynes said.

The report also cited the emergence of new start-ups that provide platforms for property developers to raise capital directly from wholesale and retail investors.

In a 2016 interview with The Urban Developer, Moresh Kokane of crowdfunding platform Estate Baron cited a PwC report predicting that the real estate equity crowdfunding market will be worth US$250 billion globally by 2020.

Kokane predicted that the market for crowdfunding in Australian real estate could be worth up to $50 billion by 2020.

Beyond technology platforms, approximately half the respondents to the survey indicated that other options were emerging, believing foreign banks will increase property lending in Australia this year.

Hynes anticipated that foreign banks will play a minimal role, preferring to form part of syndicates, rather than lend directly.

“For example, you might see a Singapore-based bank lending to a Singapore consortium buying a commercial tower in Sydney,” Hynes said.

It is expected that the upcoming report and recommendations of the Royal Commission to the federal government will see even tighter controls placed on the major banks and brokers' practices.