Research Briefing | Jun 7, 2023

How bank turmoil is impacting APAC commercial real estate credit

Recent bank funding turmoil is likely to lead to tighter lending conditions in commercial real estate markets in the Asia-Pacific region. CRE loans typically attract a higher risk weight than other bank assets, which makes the sector more susceptible to a more marked pullback in lending should banks’ capital adequacy come into question.

What you will learn:

  • Recent bank funding turmoil is likely to lead to tighter lending conditions in commercial real estate markets in the Asia-Pacific region. CRE loans typically attract a higher risk weight than other bank assets, which makes the sector more susceptible to a more marked pullback in lending should banks’ capital adequacy come into question.
  • Should more credit stress emerge, banks are also likely to be more selective in terms of where they focus their lending. CRE loans, or more broadly, specialised lending, accounts for on average just under 6% of the loan books for some APAC banks, but over 11% of the banks’ risk weighted assets (and by extension, capital adequacy).
  • The high participation in commercial real estate debt markets from offshore banks has also clouded the stability of the credit environment. While a more diverse set of lenders is generally a positive, offshore banks bring a different set of risks to the market – historically, offshore banks have been more volatile in expanding and contracting their CRE loan exposure.
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