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News Release

London

Bank of England lending figures for real estate continue to decline despite strong sentiment in lending markets

JLL reacts to Bank of England Q1 2014 Bank Lending Data published today


 
 
 
 
 
 
 
 
 
 
 
 
 
1st May 2014  - UK bank exposure to real estate (the proportion of lending to real estate a percentage of total lending) in Q1 2014 fell to its lowest level since June 2001, according to the latest Bank of England quarterly lending figures. While total lending was down 3.5% year-on-year, lending to real estate fell by 15.9%. As a result, UK bank exposure to real estate dropped to 7.1% down from 7.2% in Q4 2013 and 8.2% in Q1 2013.
Jeremy Handley, Director of Valuation Advisory at JLL, said: “We are surprised by the continuing scale of change in the Bank of England lending figures. Banks are clearly continuing to consolidate their balance sheets. However, there has also been a marked improvement in sentiment in the real estate lending markets over the past year and also a significant increase in the number of lenders wanting to participate in the improving real estate market. Not all of these lenders are captured in the figures because the numbers do not include the activity of non-UK banks and alternative lenders. There is also a scarcity of opportunities in the market”.

David Lebus, Associate Director, Corporate Finance at JLL, added: “Banks are finding it difficult to place their capital. This is due to the sheer weight of equity targeting the market and competing for opportunities. This, combined with an ever increasing number of active lenders across a wide range of quantum and risk appetite, is combining to drive down margins. While banks remain conscious of risk and underwriting standards have become more stringent, they have been moving up the risk curve and are lending at cheaper rates. Whilst we feel the market has reached an equilibrium of sorts, there is no doubt that borrowers are able to benefit from the current levels of competition. In other words, ‘borrower power’ has returned to the market’”.
 

 
Source: Bank of England, JLL
 
 
Notes to Editors:
• From January 2011 the Bank of England removed lending to companies for the development of buildings data from the series. The series has not been historically adjusted.