KordaMentha Real Estate's Property exposures update provides a snapshot of APRA's latest property exposure data on the commercial and residential sectors.
The Australian Prudential Regulation Authority ('APRA') recently released its latest quarterly property exposure data for domestic and foreign Authorised Deposit-taking Institutions ('ADI's').
The Property exposures update - June quarter 2019 provides a snapshot of APRA's quarterly property exposures data on commercial and residential sectors.
ADIs' exposure to commercial property ('All Commercial') fell quarter-on-quarter for the first time since December 2016. Declines were widespread, with even the recovery in Land and 'Other Residential' exposure (apartments and high-rise accommodation) noted in our previous report showing signs of losing momentum.
'All Commercial' property exposure down
Aggregate commercial property exposure contracted 0.2% quarter-on-quarter for the first time since December 2016. This was driven by negative exposure growth in all commercial sectors excluding Office (1.1%), Industrial (0.5%) and Tourism and Leisure (0.6%). However, exposure across each of the commercial sectors remains relatively unchanged in the 12 months to June 2019 compared with the 12 months to March 2019.
Office fastest growing sector
The Office sector drew the highest percentage increase in ADIs' exposure for the second quarter in a row. Although Office exposure growth (1.1%) was the highest of all commercial sectors, its pace of growth was less than half that recorded in the prior quarter (2.7%). Despite strong growth over the past two quarters, Office exposure rose more slowly than Retail (8.5%), Industrial (7.3%) and Tourism and Leisure. Office does, however, remain the largest sector exposure for ADIs, with 31.1% of total commercial property loans.
Recovery in Development slows
Following exposure growth in the Land Development/Subdivisions (0.9%) and Other Residential (1.3%) sectors during March 2019, exposure growth in the June 2019 quarter fell by 1.1% and 0.1% respectively. The annual rate of decline in the Land Development/Subdivisions sector eased to 9.0%, after a fall of 9.8% was recorded for the 12 months to March 2019.
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