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APRA Issues New Guidance on Commercial Property Lending Practices

APRA Issues New Guidance on Commercial Property Lending Practices

APRA Issues New Guidance on Commercial Property Lending Practices?w=400

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The Australian Prudential Regulation Authority (APRA) has recently provided updated guidance to authorised deposit-taking institutions (ADIs) regarding pre-sales and commercial property lending.
This move aims to clarify expectations and support both borrowers and lenders in the commercial property sector.

In a letter dated 13 February 2025, APRA addressed concerns surrounding the financing of new unit block constructions, particularly the requirement for pre-sales. Historically, a 2017 rule linked the financing of such projects to the necessity of all properties being pre-sold, which posed challenges for developers and investors. APRA's latest communication clarifies that a 100% pre-sale requirement is not mandatory, offering more flexibility in financing arrangements.

This clarification is significant for borrowers, especially those with limited or poor credit histories, as it may ease the stringent conditions previously associated with commercial property loans. By reducing the emphasis on full pre-sales, developers and investors might find it more feasible to secure funding, potentially leading to increased development activity and broader access to commercial property investments.

For lenders, this guidance provides a clearer framework for assessing loan applications in the commercial property sector. It encourages a more nuanced evaluation of projects, considering factors beyond just pre-sales, such as the viability of the project, the track record of the developer, and market conditions.

APRA's initiative reflects a broader effort to balance financial stability with the need to support economic growth and development. By offering more flexible lending guidelines, APRA aims to stimulate the commercial property market while ensuring that lending practices remain prudent and risk-aware.

Borrowers and lenders are encouraged to review APRA's latest guidance in detail to understand the implications for their specific circumstances. Staying informed about such regulatory updates is crucial for navigating the evolving landscape of commercial property financing in Australia.

Published:Saturday, 27th Sep 2025
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

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Knowledgebase
Loan-to-Value Ratio (LTV):
A ratio that compares the value of the loan to the market value of the property securing the loan.


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