Moody's: Australian major banks face rising but manageable risks in commercial property

The US-based rating agency, Moody’s Investor Service, published their latest report on the Australian banking system, underscoring the growing settlement risk from potential oversupply of newly-built residential apartments.

Key Quotes:

“Moody's Investors Service says that higher vacancy rates from an increase in supply of, and weak demand for, office properties and, growing settlement risk from potential oversupply of newly-built residential apartments in Australia's commercial real estate sector is posing rising but still manageable risks for the country's four major banks”

"Australia's major banks have been growing their CRE exposures modestly in recent years, and are thus vulnerable to the risks from higher office vacancy rates in Brisbane and Perth and settlement risks from a potential residential apartment oversupply in Sydney, Melbourne and Brisbane"

"These credit negative developments are somewhat mitigated by the banks' limited direct exposure to the higher risk CRE segments and by their tightened lending criteria"