Government considers commercial property loan bailout

The Federal Government and Australia’s biggest banks are reportedly working on plans to prevent a collapse in commercial property finance that would see taxpayer funds used to prop up the sector.

The Federal Government and Australia’s biggest banks are reportedly working on plans to prevent a collapse in commercial property finance that would see taxpayer funds used to prop up the sector.

According to a report in The Australian Financial Review, the banks and the Government are concerned about the possibility of a fire-sale of commercial property assets if property owners are unable to refinance loans.

The banks are worried that lenders (particularly foreign banks) may abandon the struggling commercial property sector, putting $50 billion of loans at risk.

The banks want the Government to step in with a scheme similar to the $2.5 billion special purpose vehicle it created late last year for car dealers after two major US finance companies pulled out of the market.

The total amount lent by banks to the commercial property sector is around $165 million.

The AFR reports that the talks are well advanced.

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