The latest Bank of England lending figures show that bank lending in sterling to real estate over the third quarter of 2009 fell for the first time since December 1997, according to Jones Lang LaSalle.
The latest Bank of England lending figures show that bank lending in sterling to real estate over the third quarter of 2009 fell for the first time since December 1997, according to Jones Lang LaSalle.
Total lending, including lending by building societies, dropped by £2.5 bn to £244 bn compared to growth of £3 bn in the previous quarter. The year-on-year percentage change in real estate lending is trending significantly downwards, in a similar fashion to that seen in both periods from 1990 to 1991 and 2000 to 2001.
JLL said the figures highlight that new lending to real estate remains challenging with little more than a handful of banks truly active in the market for the most secure cash flows. Jones Lang LaSalle's forthcoming Lenders Expectations Survey supports this.
Jeremy Handley, director in Jones Lang LaSalle's Valuation Advisory Group, commented: 'The current supply and demand imbalance in the investment market is resulting in rapid compression of prime yields across all the major sectors in the UK.
'Given that the five-year swaps rates are currently at 3.3% and margins are in the region of 225 basis points on best prime investment stock, it can be argued that current West End prime yields of 5.25%, for instance are challenging to justify on a geared purchase with any risk premium, although equity investors still find these levels attractive. In our view this will limit, but not prevent, yield compression going forward.'
