A new report from a leading UK property specialist has suggested that the availability of commercial mortgages to UK businesses is limited. Lenders expect to advance lower amounts in 2011 than in 2010 according to the data from the report on lenders’ expectations commissioned and complied by Jones Lang LaSalle’s.
Fewer lenders are prepared to lend over £100 million in 2011 compared to 2010. That’s the conclusion of the report into lender’s attitudes towards commercial mortgages in the UK, which also showed that more lenders would consider smaller lending of between £50 and £100 million.
The view of Jeremy Handley of Jones Lang LaSalle is that the financial problems that have beset countries across the world are going to have lengthy impact on commercial property.
Bank of England figures recently showed real estate lending dropped to its lowest level since records began in 1987. In the last quarter of 2010, commercial mortgages and property lending fell by £16 billion to £221 billion – the largest fall in 24 years.
Whilst the 2011 figures may be pessimistic, lenders do expect the market to recover in 2010. Many lenders told the Jones Lang LaSalle survey that they expect from 2012, commercial lending deals to be upwards of £600 million when the market begins to recover.
As well as commercial mortgage lending being subdued, maximum ‘loan to values’ (LTVs) are also currently at low levels. Most survey respondents quoted a maximum LTV of just 60-70 per cent and many are not expecting this to rise over the next few years. Some even believe that LTVs will stay under 60 per cent for the foreseeable future thanks to issues with liquidity and increased regulation.
When the market begins to recover, lenders expect ‘loan to values’ to rise accordingly. Lenders are predicting that 2013 will see a return of 80% LTVs compared with the expected rise to over 70 per cent LTVs by 2012.
Commercial mortgages are most commonly available for offices, according to the data. Lenders like the transparency and ease of office transactions and so this sector has enjoyed a common weighting circa 40 per cent for each of the years surveyed. London office property was particularly popular with commercial lenders.
Borrowing money through a commercial mortgage has been difficult over the last few years and the situation may not improve significantly in 2011. Loan to Values are expected to remain low requiring companies to put in large deposits to buy commercial premises. However, the situation looks set to improve over the next few years.
Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.
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