The commercial property industry has bought the Lycra, drank the protein shakes, watched the Mr Motivator DVD and now it is reaping the benefit of its new regime. It has revealed a newly-slimmed figure; £293bn, which was the amount of debt secured against commercial property in 2010. This represents a fall from £300bn, which arose out of the bloated lending made during the property boom.
The UK Commercial Property Lending Market survey, by De Montford University, found 67% of lenders reported a decline in the value of outstanding loans in 2010, the first recorded fall in the report’s history.
Year-end-2009 lenders debts fell from £228.3bn to £206.9bn by year-end-2010, including around £10bn debt transferred to NAMA, Ireland’s National Asset Management Agency.
UK lenders were found to be exposing themselves far more to non-prime commercial property; 69% compared with a more modest 45% among German lenders.
The reduction in debt is regarded as “important stepping stone on the path to recovery” and the offloading of property assets has been managed in a way that hasn’t caused detriment to the commercial property market, according to the report.
Conditions for lenders and the industry remain unsettled, with the belt-buckle only slightly loosened for new loans; £19.9bn (not including short-term extensions to maturing loans) were made in 2010, up from £15.5bn in 2009.
Lending on commercial development accounted for 4.75% of loan books, an all-time low. This trimming of debt may be viewed as positive, but in Whitehall, Vince Cable, sees some unsightly lumps. The Business Secretary references Project Merlin, a finance scheme backed by Barclays, HSBC, Royal Bank of Scotland and Standard Chartered, designed to stimulate the UK economy by providing loans to businesses. Project Merlin lending is currently below Government-specified levels. Banks say demand for loans doesn’t exist, while Cable raises the possibility of putting the banks on a treadmill of extra taxes if targets are not met.
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British Land Releases Commercial Property Results
