LMA: European lenders cite political uncertainty and competition for diminished deal flow as chief concerns

Political uncertainty and too much competition chasing too few deals are the twin challenges faced by European real estate lenders this year, a new survey by the Loan Market Association (LMA) shows, as voted by 75% of all respondents.

According to the survey, an uncertain political environment is the top concern, according to one in four respondents (40.6%), while more than one-third (34.4%) said picked the lack of deals and too strong competition as the current year’s biggest obstacle.

Source: LMA

The survey – which comprised 140 active lenders drawn from LMA’s membership across 17 markets throughout Europe – was conducted between April 4 and 18, ahead of LMA’s seventh real estate finance conference earlier this month. The survey aimed to determine where the key investment opportunities and challenges lay in Europe, which sectors and asset classes were most likely to drive future growth and where future lending would most likely be sourced from.

Almost half of all respondents believed the property cycle at at its peak (45.2%), while another quarter (25.8%) suggested the cycle had already entered contraction phase. In a subsequent question, a slight majority of respondents (51.6%) believe next year will see the start of the next real estate downturn.  Confidence remains robust for the environment in the UK, with almost two-thirds (65.6%) suggesting Britain remains a ‘safe-haven’. 

However, active lenders were equivocal on which European real estate market would stand to benefit most from Brexit.  Berlin as the modest city leader (17.9%), closely followed by Paris and Amsterdam (tied on 15.4%) who were closely followed by Frankfurt and Dublin (12.9% and 12.8%, respectively).

Source: LMA

PRS was name-checked as the hottest sector for real estate finance sector with just under one-third (31%) of the vote, followed by logistics (24.1%) and long leased assets (20.7%) in second and third, respectively. Turning to overseas investment into Europe, China is still considered the dominant capital source (38.9%), followed by Middle East (24.1%) and the Far East (20.7%).

Lenders were tied on capital requirements and risk retention rules related to securitisation, and changes to tax legislation and accounting standards as the dominant regulatory headaches, with each issue collecting more than on3-third of the total vote (34.4%). Finally, debt funds are again tipped to show the biggest growth in new lending in 2019, collecting more than half the respondents’ votes (51.7%), followed by insurance lenders (20.7%), with pension funds and banks tied on 13.8%.

The LMA aims to improve liquidity, efficiency and transparency in the primary and secondary syndicated loan markets in Europe, the Middle East and Africa (EMEA).

james.wallace@realassetmedia.com