A snapshot of Australian bank/super fund exposure to commercial real estate
Bank exposure to commercial real estate has risen to 13% of loans, while super fund holdings total a larger 16% of their assets.
Commercial property prices have fallen sharply in most advanced economies over the past year or two, with Green Street Advisors calculating 20%-plus declines in the US and euro area and the RBA estimating a roughly 10% decline in Australia as at late 2023.
Against this backdrop, CCI has taken a snapshot of the exposure of Australian banks and super funds to commercial property and infrastructure.
In aggregate, bank loans to commercial real estate have reached about $0.4 trillion, edging up to 13% of total bank loans over the past couple of years.
This is a little above the 12% average of the past two decades, but well below the 17% peak reached during the global financial crisis.
However, there is a marked divergence in the exposure of different banks.
The exposure of foreign banks continues to trend higher and has reached a series-high 21% of their local loan book.
The exposure of the major domestic banks has edged up to 10% of their loans, while commercial real estate loans written by small domestic banks make up only 4% of their loans.
In comparison, superannuation fund holdings of commercial real estate and infrastructure currently total over $0.35 trillion.
While super fund holdings are a little smaller in dollar terms, the exposure of pension funds is greater than banks when expressed as a share of assets.
Across the pension system, commercial property and infrastructure – where most of it is unlisted – currently accounts for 16% of total super fund assets, which is at the high end of the range of a relatively short history.
Commercial property and infrastructure accounts for 19% of industry fund
assets, 16% of public sector fund assets and 10% of retail sector assets.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy, contributing to the investment decisions of the firm. Kieran has long experience as a macroeconomist in both the private and public sectors. He has worked most recently as Chief Markets Economist for National Australia Bank and was previously Chief Economist, Australia and New Zealand, for Barclays Bank and ABN Amro Bank/RBS. Kieran also worked as Principal Adviser on the macroeconomy and budget policy in the Commonwealth Treasury and Director of Forecasting.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
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