UK property market boosted as banks seek to lend

The number of financial institutions willing to provide debt for commercial property deals in the UK has almost doubled, according to new research by Savills, boosting hopes of substantial recovery in the market.


By Graham Ruddick, City Reporter
Published: 12:01AM BST 06 Oct 2009

City of London - UK property market boosted as banks seek to lend
Savills' data suggests that banks have again become attracted by the yields offered on commercial property Photo: AFP/GETTY

Leaders in the property industry fear that any recovery in the beleaguered sector will be slow because, with £250bn of debt outstanding, banks have indicated that they plan to scale back their exposure.

However, new data from Savills, which analyses 100 lenders, suggests that banks have again become attracted by the yields offered on commercial property as finance markets stabilise.

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William Newsom, the Savills UK head of valuation, said: "In March when we conducted our last survey, we weren't aware of any banks prepared to lend above £100m on their own, but today perhaps half a dozen are prepared to do so."

But, he warned, lenders are "treading a path of prudence". Finance is being targeted at quality properties, of which there are few on sale in the market, and the policies of bank bosses are "cautious".

He added: "For the first time in years I am not aware of any significant new lenders looking at coming into the market despite these favourable conditions."

A 45pc fall in UK property values in the two years from summer 2007 was a major reason for the crisis in the UK financial industry. HBOS and Royal Bank of Scotland lent heavily to the sector but the crash forced loan-to-value covenants to breach and loans to be written off.

The research from Savills claims that the number of lenders prepared to finance major deals almost doubled between March and June, when a number of overseas and UK-based opportunities funds began targeting distressed properties.

The list of lenders is dominated by German banks, such as Deutsche Postbank, which make up 48pc.

However, Barclays, HSBC, RBS and Lloyds have all returned to the market.

In March, Savills found 12 lenders would be prepared to lend on their own by way of bilateral loan secured against commercial and/or residential property on deals worth more than £25m.

That figure has now risen to 23 for deals over £20m, with the lower value reflecting further falls in asset pricing.