More than 80% of lenders intend to increase their property loan
books this year, the latest research from Savills reveals.
Although events such as UK elections, Donald Trump’s presidency and the EU referendum had disrupted the market, investors were still keen to increase their exposure to the UK market, said the agency as it unveiled the findings of its annual Financing Property research this Tuesday.
The Savills report found that 81% of lenders planned to increase their loan books in 2017, which is consistent with the trend over the past four years and four times as many as said they would increase lending in 2008. Some 14% said they intended to maintain their existing levels of lending.
Much of the appetite was focused on the prime market, which had seen increased levels of competition due to a lack of available product, said Savills.
This had put the balance of power “firmly with the borrower for this type of product”, said Savills director Nick Hume, adding that lenders needed to “re-evaluate and selectively go up the risk curve” if they wanted to reverse the balance of power.
Lenders wanting to tap new opportunities would need to diversify by sector, look to regional cities, reduce the size of the target loan, consider good secondary products and extend their focus to emerging players in the market and refinancing, said Savills.
There were also opportunities for investors if they went up the risk curve and targeted regional offices or alternative assets such as pubs, said Mat Oakley, head of UK and European commercial research at Savills.
But while borrowers would find a broad range of niche lenders and alternative financiers willing to lend to them, they would need to do their homework first, he said.
Last year, investment volumes had fallen 24% as refinancing had become more attractive following the EU referendum, leading to a slowdown in new deals. The caution caused by the Brexit vote also led to a shortage of opportunities to deploy capital as overseas investors held on to assets.
However, Savills said 2017 had started well, with the first quarter the third best in the past 10 years.