In early 2020 the real estate debt capital market was quietly optimistic. By January, the residential market had recovered almost all of the losses suffered between 2017 and 2019. Most lenders were looking for new opportunities to reduce their loan books, with 87% expected to maintain or loosen their investment credit criteria.
And then COVID-19 entered our vocabulary.
The pandemic brought a tidal wave of uncertainty to the real estate debt market. And while we’re yet to feel its full impact on the economy, property markets have certainly begun to suffer as a result.
However, there are some marked differences to the Global Financial Crisis in 2008/9, the last time markets faced significant challenges. There is still liquidity in the market, thanks to the RBA, government support schemes and the empathetic actions of lenders. Plus, with interest rates at historic lows, debt remains an attractive asset class for investors.
As new risks continue to emerge, investors and lenders are likely to face ongoing uncertainty for at least the next 12 to 18 months.
We surveyed 162 participants in banks, non-banks, private lenders, family offices and super funds in February. In August, just over 100 provided their perspective pre- and post-COVID 19, for our third annual market survey. Their views help us form a better understanding of how the pandemic is shaping Australia’s debt capital market for property assets – and what we can expect in the year ahead.
The responses revealed six significant trends.
To read the full 2020 State of Play report click here.