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Trust has restored in the commercial real estate credit markets as new loans have reached high levels since the downturn and the value of loan book balances has risen for the first time since 2008, according to the most extensive survey of the UK commercial real estate credit markets. At year-end 2015, the aggregate amount of liabilities was £168.
This represents an upturn of 1.9% from £165. 1.3 billion at the end of 2014 and the first rise since 2008. Total lending in 2015 was 53.7bn pounds, up from 45bn pounds. in 2014 according to the De Montfort Commercial Property Lending Report 2015.
Whereas the volume of new business increased, the proportional rise to 18 moderate. Additional proof of the market's recovery is the almost 50% fall in the value of non-performing debt (defaulted debt in contravention of key ratios). The value of £12 billion of research reported district credit at the end of 2015 was 1 billion, up from £23 billion in the previous year and £47 billion at the end of 2009.
The loan to value (LTV) indicators for current lending continued to decline, mirroring the increase in commercial real estate value, while lending by the banking sector remained on similar conditions to recent years. By year-end 2015 was 87. 5 per cent (123,5 billion) of total liabilities had an LTV rating of 70% or less, down from 77% (£107 billion) at year-end 2014 and 63% (£99 billion) at year-end 2013.
Debts with an LTV between 71% and 100% corresponded to 7.5% (£10.6 billion) of the total and only 5% (£6.9 billion) had an LTV of more than 101%. In particular, credit LTV averages declined across all sub-sectors over the course of 2015, indicating good lenders discipline despite the strong nature of the markets.
Despite still dominating the markets, British banking and home loan and savings institutions continued to lose ground in terms of overall saturation. At year-end 2015, they accounted for 34% of new lending - the slowest ever for research - from 39% in the year before. Also, the percentage of liabilities remaining on their balance sheets decreased from 49% of the overall amount at year-end 2014 to 45.5% in 2015.
This was the first occasion that insurers were the second biggest new lender class, accounting for 16% (£8.57bn) of the overall number in 2015. 1 per cent (£25. 4bn) of the overall marked versus 12. 7 per cent (£21 billion) in 2014. Geographically, the breakdown of loan defaults showed a sharp distortion in favor of London's center; 43% of overall loan defaults are backed by real estate in the capitol, the highest ever research score, and a sharp rise from 26% in 2010.
In spite of a general rise in lending, the value of new financing for expansion dropped from £2.4bn in 2014 to £2.25bn in 2015. Banking, home loan and savings and insurers raised their lending to commercial real estate from £1 57 billion in 2014 to 1 95 billion in 2015, but outside lending outside the UK declined from £0 8 billion in 2014 to £0 3 billion in 2015.
In the 2015 Review, creditors continue to have a strong bias towards large scale ticketing for both developing and investing use. Just fourteen bankers (30%), home loan and savings associations and insurers were willing to lend 5m or less for commercial investments, against thirty-one (67%) who would do so at over £100m.
It also shows how the credit sales markets have evolved behind the curtain. Syndications continue to grow, with the value of securitised debt around doubled for the second consecutive year to £9.2bn (compared with £4.7bn in 2014 and £2.1bn in 2013).
Commenting on the event, Ion Fletcher, Political Affairs (Finance) Manager at the British Federation of Properties, said: "With non-performing credit falling at a very low level, combined with a progressive rise in new credit, this indicates a strong and resilient commercial real estate credit area. "Reaffirming that the markets were at a good point until 2016 in fundamental data, mood and disciplines, and the uncertainties created by the EU referenda.