Residential developers struggling to access financing post-GFC: RBA

The inability of developers of residential property and the commercial property sector to access financing for their projects remains one of the biggest changes to the banking sector following the 2007 GFC, according to the Reserve Bank.

“The most significant change in business lending since the onset of the global financial crisis has been in the provision of finance to the commercial property sector, including developers of residential property,” says the RBA in its submission to the Senate Economics References Committee’s inquiry into the post–GFC banking sector.

“Some of this reflects the fact that the foreign banks which have scaled back their operations in Australia had large exposures to this sector. Other banks have also reassessed the risks of lending to this sector, in light of commercial property exposures accounting for a disproportionate share of impaired bank loans.

“Beyond developments in commercial property, the softness in business credit in the years following the global financial crisis has reflected both weak demand from the non-mining business sector as it has taken a more conservative approach towards debt in an uncertain environment, and the mining sector making little use of domestic intermediated credit,” says the RBA.

Recently though, the RBA says, there have been some “tentative signs that larger business borrowers are willing to take on some additional debt”.