Lending to property businesses falls despite Funding for Lending – Jones Lang LaSalle
Jones Lang LaSalle has highlighted in a recent report that the latest Bank of England quarterly lending figures show that UK bank exposure to property fell to its lowest since 2002 in the third quarter.
The proportion of lending to property as a percentage of total lending in Q3 2012 was 8.4%. Lending overall has been relatively stable over the past year, Jones Lang LaSalle notes, falling only 1.6% during that time, but lending to property was negative for the tenth quarter in a row, down 8.1% from the level seen a year previously.
JLL notes that the stable total lending figure hides a difference between lending to individuals and lending to businesses. It says that the government’s Funding for Lending scheme, which launched in July, may be starting to have a positive effect, as lending figures for individuals in October were encouraging, with an increase in the number of loans approved for house purchases and an increase in unsecured consumer credit.
David Lebus, senior consultant, Jones Lang LaSalle corporate finance, said that banks remain reluctant to lend in areas where there is significant demand for debt, such as secondary markets and development. “It is hoped,” he added, “that the numerous debt funds being raised by private equity houses may provide funding for these markets currently starved of finance once they begin deploying capital next year”.
Jeremy Handley, director of valuation advisory at JLL, says the rate at which banks are unwinding their loans is likely to slow down as it becomes harder for them to identify “easy wins”. A more positive note, he says, is that ‘slotting’ appears to have had less of an impact than originally feared. “These factors, taken together with a possible boost from Funding for Lending, could help stem the rate of decline in banks’ exposure to real estate and may be reflected in the Q4 numbers”.
