February 1, 2023
2023 Forecast: What to Expect in the Commercial Property Finance Market
To kick-start 2023, we wanted to share some thoughts on what we’re seeing in market and give you insight on what we’re expecting for this year.
The effects of rising interest rates
In 2023, we will see the true impact of last year’s interest rate rises take effect on the market. Asset prices will reset as loans mature and we expect to see non-banks step up and create opportunities in this space.
Last year, we wrote about highly geared CRE loans now at risk of breaching lenders’ Interest Coverage Ratio requirements as interest rates rise. This will continue to be an issue in 2023. If you’re in this position, you have options which can be capital intensive. Give us a call to discuss.
The peak of interest rate rises will occur in the first half of this year, creating a new benchmark for cost of funds. We believe that confidence will return towards the end of the year and transactions will pick up as a result.
A strong residential apartment market
The residential apartment market is still undersupplied and will be the strongest market for 2023. As students slowly return and Australia’s migration set to rebound to pre-COVID levels, plus stoppages to construction projects over the last few years, means demand for housing will be high.
Established developers with strong reputations and will have strong presales. In NSW, developers with iCiRT ratings will have clear advantage over those without.
Will you be seeking funding for your residential development project? Speak to Stamford Capital about your needs.
Construction challenges softening
Last year, the cost of construction materials increased on average 24% over the 12 months, according to Infrastructure Australia. This year, prices will soften as international supply changes open. Labour shortages will be the main concern for the sector, hopefully mitigated by open borders and higher migration targets.
We are across what lenders are looking for when it comes to construction finance. Get in touch if you’re concerned about sector challenges affecting your build.
2023 will be the start of the new normal and, while there will be some challenges, lenders will adapt and offer new solutions and borrowers with strong histories and solid reputations will still have access to capital.
Stamford Capital is here to help anyone at risk of breaching their loan requirements, or seeking to find opportunities in 2023. We have over 13 years’ experience working nationally and brokered $2 billion worth of debt in FY22.