LONDON, Nov 5 (Reuters) - Sterling bank lending to real estate borrowers dropped in the third quarter for the first time since December 1997, showing property credit markets remained broadly depressed, data showed on Thursday.
Property consultant Jones Lang LaSalle data showed total lending dropped by 2.5 billion pounds to 244 billion, including lending by building societies, against growth of 3 billion pounds in the second quarter.
Jones Lang LaSalle said the figures highlighted that real estate credit markets remain broadly depressed, with little more than a handful of banks truly active in the market.
Many of the respondents to the Jones Lang LaSalle Lenders Expectations Survey said they expected margins to tighten through greater competition, although these reductions were not expected to be substantial.
The survey suggests that whilst margins on best prime investment will fall from a current level of 200-250 basis points over the next 18 months, most lenders think it is unlikely they will be below 150 basis points before end 2011.
"Given that the five year swaps rates are currently at 3.3 percent 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 percent, are challenging to justify on a geared purchase with any risk premium," said Jeremy Handley, director in Jones Lang LaSalle's Valuation Advisory Group.
The survey also highlights that lenders expect to increase loan sizes over the next three years with 26 percent expecting 100 million pounds-plus deals to be available at end-2010 and 43 percent at the end-2011.
(Reporting by Sinead Cruise; Editing by Andrew Macdonald)
(See www.reutersrealestate.com for the global service for real estate professionals from Reuters) Keywords: PROPERTY LENDING/
(sinead.cruise@thomsonreuters.com; +44 (0)207 542 5154; Reuters Messaging: sinead.cruise.reuters.com@reuters.net)
COPYRIGHT
Copyright Thomson Reuters 2009. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
