How Much Deposit Do You Need to Buy Commercial Property in Australia?

Why is the commercial deposit higher than residential?

Because the lender is taking a different kind of risk.

A residential lender can go to 80% — or beyond with lenders mortgage insurance — because the security is a house in a deep, liquid market with thousands of potential buyers and a national vacancy rate that was 1.3% in July 2026. If the loan goes bad, the asset sells.

A commercial lender is looking at a building whose value depends heavily on a lease, in a market where the buyer pool is narrower and re-leasing is measured in months rather than weeks. There is no equivalent of LMI in the commercial market to bridge the gap. So the lender takes a bigger buffer instead, and you fund it.

Published sources genuinely disagree on the top of the band. Some commercial brokers describe standard metro investment commercial as capped around 65–70%, with owner-occupiers pushing to 75%. Others put standard commercial assets at or near 80% at most lenders. Both positions are published by credible Australian brokers in 2026, and the gap reflects different lender panels and different definitions of standard. Treat 65–80% as the published band, not a promise, and expect the answer for an actual purchase to come from a broker who knows current lender policy.

Why is the LVR struck against the valuation, not the price?

The loan is sized against the lower of the valuation and the purchase price. A valuation above contract does not help you; a valuation below contract costs you.

When you buy residentially and the bank valuation comes in at contract, nobody notices the mechanism. In commercial it matters far more often, because commercial valuations diverge from contract prices more readily. Commercial properties are not homogeneous, there are fewer comparable sales, and a price can reflect things a valuer will not count — vendor incentives, a fit-out contribution, a rent that sits above market, or a buyer with a strategic reason to pay up.

A valuation for finance is not there to confirm you paid a fair price. It is a risk tool for the lender, telling it what it could reasonably recover. Valuers working to Australian Property Institute standards lean on settled comparable sales and, for income-producing assets, on capitalised net income — so a short remaining lease term, a weak tenant, or a rent above market can pull the number down even where the building is sound.

What happens when the valuation comes in below the contract price?

The lender lends less while the amount owed to the vendor stays the same, so the buyer must find the difference.

Say you have contracted to buy a small industrial unit for $1,500,000, and your lender has indicated a maximum 70% LVR.

What else should you notice about a valuation shortfall?

The lower valuation does not reduce stamp duty or remove other settlement costs.

The stamp duty is still calculated on $1,500,000, not on the valuation — the lower valuation gives you no relief anywhere else. If GST applies to the purchase and the sale does not qualify as a GST-free going concern, that is a further cash-flow event at settlement.

Your options at that point are narrow: contribute more cash, offer additional security, renegotiate with the vendor, or seek a second valuation. None of them are comfortable, and all of them are better handled before you sign than after.

The practical takeaway is not to expect a shortfall. It is that a commercial budget built on the contract price and a hoped-for LVR has no margin in it. Commercial buyers who plan properly hold a buffer above the headline deposit and negotiate a finance condition into the contract — a solicitor’s job, and a reason solicitors are engaged earlier in commercial purchases.

Why are owner-occupiers generally treated better than investors?

A business owner occupying the premises gives the lender a different serviceability story from a passive investor relying on a tenant.

Two buyers, same building, same price — and they will commonly be offered different terms. If you are buying premises your own business will occupy, lenders generally view you more favourably than a passive investor. Published guidance describes owner-occupiers reaching the upper end of an asset’s LVR band — often 75–80% where an investor on the same building might be held to 65–70% — and typically attracting better pricing, with brokers commonly citing a 0.25% to 0.5% rate advantage for genuine owner-occupiers.

For an investor, the lender is assessing rent from a tenant it does not control, discounted for vacancy and outgoings — commonly shaded by 20–30% — against a lease with a finite term. For an owner-occupier, the lender is assessing the trading cash flow of the business that will be in the building, usually on an EBITDA basis, with years of financials behind it. One income stream can walk out at lease expiry. The other is the borrower.

Being an owner-occupier improves your position within the band your asset sits in; it does not move the band. A specialised, single-use building bought by an owner-occupier is still a specialised building to the lender.

What else moves the commercial LVR?

Asset type, serviceability, loan structure, guarantees and additional security all affect the number.

The asset type comes first. Lenders sort commercial security by how easily it could be sold or re-leased if they had to recover. Standard offices, retail shops and industrial sheds — deep tenant and buyer pools, clear vacant-possession value — sit at the top of the range. Purpose-built or single-use assets where value is tied to the operator sit materially lower; sources commonly put specialised security around 55–60%, and lenders value these on vacant possession rather than value-in-use, which is a lower number again.

Commercial lending generally works to a debt service coverage ratio, commonly a minimum in the 1.20 to 1.50 range, or a published interest cover ratio. One bank’s 2026 commercial guide sets ICR at 1.1x up to 60% LVR and 1.3x above it, assessed with a buffer. Because interest scales with the loan while rent does not, these tests tighten exactly as you push toward the LVR cap. Plenty of deals are limited by serviceability rather than deposit.

Commercial facility terms commonly run 3 to 15 years, with 5 to 10 typical for property. Amortisation may be longer than the term, which means a balloon at expiry and a refinance event to plan for — a structural difference from a 30-year residential loan that many first-time commercial buyers miss.

Where a company or trust is the borrower, directors’ guarantees are standard. Lenders generally require a guarantor to get independent legal advice first and to certify it. Equity in another property can sometimes be used to reduce the cash required at settlement, but that links two assets together and is a strategy question as much as a finance one.

Where should a commercial buyer go next?

Speak with a commercial finance broker before relying on a particular LVR or borrowing structure.

Commercial lender panels, asset-type policy and serviceability tests are a different body of knowledge from residential lending. Kallea works alongside broker partners and can point you in that direction — we do not provide credit assistance, and every question about your capacity or your LVR is theirs to answer.

What Kallea can do is make sure the property side of the equation stands up before finance is tested: whether the lease supports the price, whether the rent sits at or above market, and whether the asset is the kind a lender will treat generously or conservatively. Those factors drive the valuation, which drives the cash. Our commercial buyer’s agency service is in development rather than fully operational, and we would rather say that plainly.

If you want a picture of your current position before any of those conversations, Kallea’s investment readiness assessment is a practical starting point.