Wealthi's Co-founder, Domenic Nesci, speaks with Pallas Capital's Executive Director, Craig Bannister, to discuss the rise of the non bank lending sector across the Australian property market.   

Established in 2016, Pallas Capital is one of Australia's leading non bank lenders, overwriting $1bn in transactions across the real estate market.  Craig notes that there has seen a rising shift in investors seeking new avenues to maximise their return on investments beyond traditional asset classes and bank lending.   

Domenic & Craig discuss the gap that the non bank lending sector fills in the market between banks and the real estate market. In addition to allowing investors to access sophisticated investment opportunities through Australian commercial real estate.   

Craig also shares his investment tips and the lessons he learned from over 20 years working in the investment industry.

This is an excellent episode with many insights, delivered in a unique and upfront format.   

Episode transcript highlights

Domenic Nesci: (11:55)

There's going to be some changes to lending policy. Some people say next year, there may be a 5/6% growth, maybe a 10% price decline. Where do you sit on that fence? How do you see the next 12 to 24 months?

Craig Bannister: (12:09)

Yeah. Well, I think prudently, you've got to expect that that's going to happen. I think we've had this run, and it's not just Australia. It's looking wild further afield into markets like the U.S., which are clearly leading in some inflation indicators now. Everyone's sort of second-guessing, "Are these permanent?" We all feel it. We all know prices are going up. We all know inflation is here. I suppose the pendulum on the other side is that the government's got so much debt that they've tried to keep interest rates so low until growth really does kick in. It's a balancing act for them to say, "We need to keep rates low. We need to really stimulate the economy after COVID." Do we get that growth happening? Inflation will come and then they'll act, and then rates will rise.Now, traditionally, when that happens, property markets will come off a bit. How much they come off will be anyone's guess really. We've had economists thinking that we're going to have 20 or 30% price declines coming into COVID. That didn't happen. Same sort of thing. Our timeframe on a loan is 12 to 18 months normally. That's a fairly average timeframe. In that timeframe, what sort of property price falls can you get? At a nasty price fall, I'd expect 15% over a year could be quite sudden. I still see that as being a good buffer for us at the back end if we had to sell a property or something to get out of this loan. 

Domenic Nesci: (15:07)

Is that a lesson then for us, Craig? I mean, the people that are out here invested in property in real estate and trying to build a portfolio, something I'm hearing from you is really don't lever yourself too high. No matter what the asset is, you want to have that cash buffer or asset base where even if you do see a sharp decline, you can weather the hit and afford