Real Estate Debt Capital Markets Survey 2021

What a difference six months makes. With Australia’s residential real estate markets running red hot, interest rates at close to zero, and few alternatives for yield, real estate debt is certainly looking attractive. And private lenders are following non-bank lenders into the arena.

While there may still be pockets of concern, including commercial and retail yields, our survey respondents seem overwhelmingly optimistic. When we surveyed lenders in the midst of COVID (June 2020), almost one-third of respondents said they planned to decrease leverage levels due to market conditions. That’s dropped right back to just 6%. Meanwhile, 82% expect to increase the size of their loan book in 2021.

This year, non-bank and private lenders made up 43% of our respondents – a greater proportion than major trading banks for the first time.

That’s also where we’re seeing a shift to reduce:

• presale requirements
• interest cover ratios and
• margins.

In this supply-driven capital market, quality developers will have the advantage. Sharper pricing terms are now available to them via the major banks, and we are seeing an appetite to combine bank debt with mezzanine loans – even for existing investment assets.

When we published our last survey results in September 2020, the underlying uncertainty was real. This year’s results indicate a big swing back.

In March 2021, we surveyed over 100 banks, non-banks, private lenders, family offices and foreign banks to gather their perspectives for our fourth annual market survey.
Respondents’ views help us understand how Australia’s debt capital market has recovered post-pandemic, and where the opportunities lie in the year ahead.

The responses revealed five significant trends.

Read the full 2021 Debt Capital Markets report here.