It is 12 months now since the collapse of the banking system. This time last year the economies of the G20 countries were on the brink of meltdown. Thankfully, the crisis was addressed and 12 months on there are positive signs emerging that we may be over the worst.
Property and funding markets remain severely affected, however. Property development finance and commercial mortgages in the UK are being rationed as the UK banks that have emerged in one piece try to reduce their exposure to property without turning off the tap altogether. Foreign banks have practically disappeared from the property development finance arena but some are still active in the commercial property investment sector.
This means that the banks that are lending are being highly selective over who they will lend to and on what projects. It is the prime sector that has driven the recent increases in transactions and values. Banks will focus on deals for prime schemes for the forseeable future because they cannot afford to risk further substantial losses from property lending.
With only a handful of banks doing any serious lending. new funders are emerging. These include family owned enterprises that have accumulated wealth over the years and understand property risks and rewards. There are also some new funds from overseas looking to lend into the UK property market as they see good returns, particularly from mezzanine finance and equity.
We expect this trend to continue, but with all funders chasing the same small pot of prime borrowers and schemes.
