Total Australian bank real estate debt reached an all-time high at $314.6 billion having increased by 12.8% over the past 12 months - the greatest annual growth since 2009.

Plan1 Co-founder, Richard Jenkins said analysis of the latest APRA statistics show total CRE debt grew by a whopping $35 billion over the 12 months to June 2022, greatest growth since 2008.

Mr Jenkins said that CRE debt held by foreign banks rose over the quarter, is now $12.7 billion higher than a year ago.

“Foreign banks accounted for 24.2% of total CRE debt, up from 20% three years ago, current share of CRE debt held by foreign banks is now close at all-time highs (which is 24.3%).

“Over the past year, Australian CRE debt held by foreign banks has increased by 20%.

CRE debt exposure held by the foreign banks in the office, industrial, retail and tourism sectors have reached all-time highs,” he said.

According to Mr Jenkins, growth of Australian CRE debt was led by office property, which has now reached an all-time high.

“Analysis of the CRE debt by sectors revealed that all also hit record highs as at June 2022, with the exception of land development.

“High density development increased by 7.4% over the year with residential development (high-density development and land subdivision) debt increasing over the year but remaining 9% below the peaks of 2017,” he said.

Mr Jenkins said the share of Australian CRE debt held by the major banks (ANZ, NAB, CBA and Westpac) decreased in the quarter, to 70.3%, well down from its 10-year average of 78.2%.

“The share of Australian CRE debt held by the major banks (ANZ, NAB, CBA and Westpac) peaked at 84.7% in 2013.

“CRE debt exposure held by the major banks in the office, industrial and retail sectors have all reached record highs.”

“In response to APRA’s revisions to ADI capital requirements, banks have been forced to reweight their portfolios to loans backed by income-producing real estate assets.

“Looking ahead, the major banks’ appetite, of course, is highly dependent on the assets they desire in their loan portfolios, but, generally, banks have started decreasing their lending activities and their exposure to construction projects.

The absence of a more receptive environment from traditional lending sources means more construction projects are turning to non-bank financiers,” Mr Jenkins said.

Mr Jenkins said that in addition, some office landlords may struggle to secure funding from the major banks as they become more selective to the assets in the sector due to the slow and reluctant return-to-office, potentially impacting the viability of aging office stock.”