Defaults on loans to commercial real estate developers could increase owing to the high levels of debt set to mature this year, the Bank of England warned today in its Financial Stability Report.
Developers face a significant refinancing challenge in 2012, as £50bn of loans are set to mature. The Bank of England has been concerned about the financial health of the commercial real estate sector for some time, and believes that it is one of the main threats to the stability of the UK banking system.
British banks’ exposure to real estate outstrips the £42bn that is at risk to Portugal, Ireland, Spain, Greece and Italy.
“Almost half of major UK banks’ UK corporate exposures relate to commercial real estate. Although only representing 2% of major UK banks’ total assets, these loans have accounted for a large proportion of UK banks’ losses on UK lending during the crisis” the Bank of England said.
sophia.furber@estatesgazette.com
