Banks focus more on supporting existing customers who wanted cash on hand rather than new clients
Availability of commercial property loans plummets as the sector struggles to recover from the impacts of the COVID-19 pandemic, according to the Reserve Bank of New Zealand (RBNZ).
The RBNZ's credit conditions survey, which focused on changes in lending practices since the lockdown, found a limited availability of commercial property mortgage even before the lockdown. It continued to drop amid the COVID-19 restrictions, from -10.4% to a net -38.4%, with tightening lending criteria most likely to blame.
Brad Olsen, a senior economist at Infometrics, commented that the outlook would most likely remain the same.
“We are going to see developers across the country struggle to get their projects moving, that is for commercial property and also for residential. That ability to access loans is going to come to a bit of a pinch point in the next few months you'd expect,” Olsen told RNZ.
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Availability of credit could not meet the demand for business and commercial loans as banks focus more on supporting existing customers rather than new clients.
Olsen expects a diverse spread of business loans going forward. However, some might think twice before applying for a loan as the industry continues to face the impacts of the pandemic.
“Those businesses [that] have a clear plan of action and can prove [that] to their banker are going to find it easier to get access to loans,” he said.
“Businesses may well defer, delay, or completely cut out planned capital spending and the need for additional loans in some area. They're going to be looking out at the economy figuring there's not quite as much economic activity going forward.”
