Historically this sector has been a common source of financial instability both here and abroad. During the height of the GFC, Australian banks remained in comparatively good shape but they did suffer a noticeable deterioration in asset performance, with the aggregate non-performance rate rising to just under 2 per cent of loans.
A significant part of that deterioration was in their commercial property lending; impaired commercial property  10  BIS central bankers’ speeches  exposures accounted for around 30 per cent of Australian banks’ non-performing domestic assets at that time. After the post-crisis downturn, the commercial property sector is again experiencing strong investor demand, and bank lending to the sector is increasing.