Suddenly, it seems, borrowing has ceased to be a problem. New lenders are tripping over each other to offer terms, and there could be a lending surplus within 12 months.
But, as with any smoke signal to emerge from a financial institution, pay close attention to the small print.
What a difference a year makes. Indeed, it wasn’t that long ago that the prevailing wisdom was that a dearth of debt was the principal obstacle to property’s recovery.
Fast forward to this week and Savills says it has identified 52 new lenders entering the UK market in the past 12 months, with 47 of them willing to lend on deals of more than £100m.
Within 24 hours, DTZ added to the sunny mood, reporting that Europe’s net debt funding gap had shrunk by 42% from $86bn (£56bn) to $50bn in just six months. Bank deleveraging has accelerated and the hope that non-bank lenders would ride to the rescue has become reality.
Indeed, DTZ now foresees a lending capacity surplus for 2013-14 in the UK, France, Germany and Sweden. The realistic notion that new lending capacity might cover the gross gap so quickly is a truly remarkable reversal.
But that’s only part of the story. Many – most – of the new lenders are targeting prime and core property. And that all but rules out huge swathes of secondary property and assets outside London – don’t forget that 70% of the UK’s outstanding £197.9bn real estate loans are secured against properties outside the capital. As Savills’ William Newsom wisely points out: “Everybody is chasing the same product.”
Can lenders be persuaded to rediscover, in Newsom’s words, “the joys of the regions and good secondary product”? Some will, but at a price.
This week’s Local Data Company/Oxford University report on the changing state of the UK’s 1,300 high streets painted a detailed pictured of growth (in value and health and beauty outlets) and decline (in books, music and women’s fashion). It was an impressively thorough piece of research and deserves to be taken seriously and built upon.
Just as illustrative was a single line from Marston’s chief executive, Ralph Findlay, at Estates Gazette’s Alternative Assets Summit on Wednesday. Commenting on the pub operator’s plans to sell 400 of its 2,000 outlets, generating £30m a year for the next four years, he said he expected their future to be residential or as food stores. “They’ve had it as pubs,” he said flatly. That’s true of other high-street offers too.
Speaking of alternative assets, there was a central message that emerged from the summit. And it was one suggested on this page in April: the alternative sector will, in the not-too-distant future, be seen as core.
Delegates were told that five of the world’s six leading real estate billionaires were already invested in alternatives, and the murmuring in the room was very much of the well-they-can’t-be-wrong kind.
CBRE executive director of specialist markets David Batchelor suggested that the switch from alternative to core would take between five and 10 years, depending on the category. If the view in the room was representative of the wider market, it could be a lot swifter than that.
Congratulations to the LandAid team who raised £90,000 at a fabulous dinner at the Natural History Museum this week
Estates Gazette made a small contribution, auctioning off a week’s guest editing of EG to help raise money on the night. Details to follow soon on the winning, and very generous, bidder – and of his plans.
damian.wild@estatesgazette.com
