Savills report a move from traditional to non-traditional lenders

Savills report a move from traditional to non-traditional lenders


Setting the tone for what is happening in the property finance world, the Savills report – prepared in association with DeMontfort University Leicester – has for some years highlighted key aspects of the market, with 2012 being no exception. Chairman of Alternation Bridging Corporation (ABC), Brian Rubins, shares his thoughts on the issues it identifies which he believes most affect short-term lending to the property industry…

New regulatory issues will further severely limit the amount of capital available to UK banks to lend to the property industry and they are believed to be effectively ‘out of the market’;

The total UK property loan book reduced by 6.8 per cent in 2011;

Of all new bank loans to the property industry, 60 per cent of loans were in excess of £20m and half of these were in excess of £50m;

16 banks operating in the UK are able to lend in excess of £100m per transaction;

More than a dozen insurance companies are now lending on UK real estate, accounting for 15 per cent of all new property loans – a figure that is growing;

After new property loans reduced to a low of £15bn in 2009 from an average of £80bn in 2006 and 2007, the figure is forecast to increase to £35bn this year and to recover to only £50bn by 2016;

Bank debt is available for prime, secondary and good secondary property but not for worse than this;

After reaching almost 12 million square feet in 1991, new development in the UK languishes at approximately 1 million square feet in 2012;

From an average spread of 75 bps, the difference between secondary and tertiary spreads has widened to 300 bps in 2012;

The number of private rented households has almost doubled in the past ten years from 2.5m to 4.8m in 2012 (estimated).

So, which of Savills’ conclusions most affect short-term lenders? 

First, a move from traditional to non-traditional lenders and secondly, the world continues to be awash with equity. 

However, these conclusions need careful interpretation as without the mainstream Banks actively lending who will take out our short-term loans? The answer appears to be the newly formed medium term lending institutions and where this fails, sales will be unavoidable.

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