U.K. outstanding property debt rises for first time since 2008Staff writer ▼ | May 25, 2016
A rise in U.K. commercial real-estate lending last year has pushed the total amount of outstanding property debt higher for the first time since 2008.
Real estate According to De Montfort University:
Since the 2008 financial crisis, this number had been steadily falling, as banks selling off mountains of soured property loans outpaced the level of new lending.
The turning point came as new lending last year rose 19% to 53.7 billion pounds, the study showed. This was a slower pace than 2014, which saw a record 51% jump to 45 billion pounds of loans, but enough to tip the balance.
On the other side, the amount of outstanding distressed loans fell to 12.1 billion pounds last year, down from 23.2 billion pounds the year before and 47.6 billion pounds at the end of 2009.
Rising levels of debt have coincided with a property boom. Low interest rates have made returns in real estate look attractive compared with other asset classes. London especially became a target for global investors that perceived the city's property as a relatively safe investment.
London accounts for 43% of total outstanding debt against property. In 2010, the London level stood at 26%. This indicates strong demand by overseas lenders for exposure to the U.K.'s biggest city, the De Montfort study said.
U.K. banks still dominate commercial real-estate lending, accounting for 34% of new loans, although they have continued to lose market share. Insurance companies accounted for 16% last year, second to banks.
Falling levels of distressed loans coupled with the rise in new loans "hints at a robust and stable commercial property lending market," said Ion Fletcher, director at the British Property Federation.
"It will be interesting to see whether commercial real-estate lending accelerates from here or grows in a more measured way." ■