Against this, CoStar recorded £23 billion of property transactions over the same period, resulting in £1 of new debt originated for every £1 of property value transacted.
The long-term 10-year average has been 74 pence of new debt per £1 of property value, indicating that most debt originations were the result of refinancing and restructuring activity. As such only 39 per cent of new debt was used to finance property acquisitions, leaving the debt market at the risk of overheating.
Another indicator for some change in market dynamics was seen around secondary loan distribution; while syndications were slow the securitisation market has picked up significantly as an exit strategy. During H1 2019, the securitisation market announced six new UK deals, with another five in the pipeline. However, of the total £4.5 billion of transactions, which were securitised, only £3 billion were sourced from newly-originated loans, the remainder were seasoned loans from 2017- 2018, still making room on balance sheets for new loans.
Peter Cosmetatos, Chief Executive of CREFC Europe, said:
“Dr Nicole Lux deserves praise for the increasingly sophisticated analysis presented in this research. Unlike the UK commercial property lending market, which is in its sixth year of stability, the research and analysis contained in the Cass report has not stood still.
“This report confirms the growing structural importance of less mainstream lenders. Not only does the research show the outsized role played by Other Lenders (and smaller lenders more generally) in higher LTV lending. It also shows that, with the activity of Insurers and UK and German Banks dominated by refinancing, Other Lenders and smaller lenders (along with Other International Banks) are also providing a disproportionate amount of the acquisition finance available to the market.”
Nick Hume, Director at Savills explains:
“Lending figures for the first half of 2019 are stronger than anticipated, particularly given that commercial investment transaction volumes over the corresponding period were down by 29.9 per cent. This perhaps demonstrates a continued focus of lending towards refinancing, the main beneficiaries appearing to be the UK Banks, Other Lenders and Insurance Companies. The debt market remains liquid and pricing is competitive, particularly for prime assets in central London.”