Banks scale back property lending

The FT quotes research that suggests banks are reducing the amount they are lending to property companies, despite growing confidence in the market developing over recent months. Banks’ reluctance to lend has seen alternative investors step into fill the gap, including insurance firms, pension funds and private equity groups. According to research by EMW, net outstanding loans made by UK banks to property investment companies and developers have fallen 13% year on year, and now stand at £175bn – around a half of the figure of four years ago, which topped £247bn. Furthermore, figures published by CBRE indicate that commercial property rents have risen an average of 3% over the past year, and the average prime yield dropped 10 basis points in the first quarter of 2014 to 5.9%. Aleksandra Starczynska, an analyst at CBRE, said: “The improving economic picture in the UK is being directly reflected in the performance of the commercial real estate.”