While lenders have been quick to pass on discounts to homeowners after last Tuesday’s rate cut, a leading specialist commercial property lender says now might be a better time than ever for brokers to take advantage of the commercial market.
Jonathan Street, chief executive of ThinkTank, says the move by the RBA
will certainly have a positive impact in the non-residential part of the market.
“The fundamentals of owning a commercial property were already very attractive for business owners and investors with achievable yields in the 6.5-9% range and the relative cost of borrowing comfortably sub 7%,” he told Australian Broker
“With rates now going down once more, it will enhance returns for existing owners with leverage while encouraging those who might be leasing premises at the moment to buy their own property, current owners to upgrade or upsize and new investors to come into the market.”
Street says brokers can expect “many more” opportunities in the commercial lending environment now, compared to previous years.
“Brokers with small business and professional clients are likely to see plenty of opportunity around in the commercial space this year as business owners and astute investors look to take advantage of low interest rates and solid returns,” he said.
“We believe there are going to be many more opportunities for brokers this year than previous years to assist with new property acquisitions, adding more property to existing portfolios, SMSF
borrowing (while still permitted by the government), refinancing into better priced or structured loans, releasing equity and, for those with the experience, residential development.”
While he low-rate environment is sure to create many opportunities, Street says brokers must be aware of the unique challenges in the commercial market.
“The challenges will mainly lie in property selection and lender matching to the client’s circumstances,” he told Australian Broker
“There are still many areas across the country where commercial property continues to struggle with high vacancy, poor demand and with no real improvement in sight. In some areas it is retail, in others industrial or office so making sure what looks like a good deal really is a good deal is vital for all concerned. If it is a deal, getting the right lender, product options and service to support it can make a transaction highly rewarding and avoid frustration and delay.”