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The growth in Australia’s business lending will soon overtake that of residential lending, a new study from investment researcher Morningstar has predicted.
According to a recent research report into the major banks, Morningstar analyst David Ellis said that he expects business credit growth to grow to 5.5 per cent (from 4.5 per cent) while predicting that residential lending would fall from its current growth rate of 5.5 per cent to between 4.5 per cent and 5 per cent.
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Mr Ellis wrote in the report that “despite remaining at insipid levels, the annual growth for business credit has picked up modestly” recently, growing to 4.5 per cent in August 2017 from three-year lows of 3.1 per cent in May.
He said: “Business credit growth has steadily recovered from negative rates during the GFC, turning positive in September 2011 and continues to gain traction.
“We forecast business credit to expand steadily to annual levels around 5.5 per cent in the medium term based on substantial infrastructure spending, high levels of residential construction in major east coast cities, increasing export volumes, record-low interest rates, and strong growth in service industries including health, aged care, tourism, education, professionals services, finance and commercial real estate.”
While looking at residential lending growth, however, Mr Ellis said: “We expect resi lending growth to slow to 4.5 [per cent] to 5 per cent next year.”
Residential lending is currently growing at 5.5 per cent (for the 12 months to 31 August).
The prediction comes as brokers and businesses increasingly look to access credit and as new market players come to the fore.
According to a recent KPMG report, Australia is now the second-largest alternative finance market in the Asia-Pacific region, growing by 53 per cent in one year to US$609 million ($774 million) in 2016.
The rise of fintechs, online lenders and peer-to-peer lenders in Australia has led to an increased uptake in small businesses seeking finance from these lenders.
KPMG has found that the largest market volume of alternative lending was through balance sheet business lending, accounting for over US$217 million ($275 million), up from US$120 million ($152 million) in 2015.
The third-largest segment was invoice trading at just under US$130 million ($165 million), up by 16 per cent on the year before. This was followed by peer-to-peer property lending, which reported US$36 million ($45 million), and peer-to-peer business lending with US$6.93 million ($8 million).
[Related: Australia now second-largest alternative finance market in APAC]
