Savills analysis says insurers are filling space vacated by banks
AIG and Legal & General are amongst six big new lenders to have entered the UK commercial property market since July, according to real estate advisor Savills.
An updated market analysis issued by the property agents today also identifies AXA as an addition to its list of active “bigger ticket” lenders.
According to Savills, ‘bigger ticket lenders’ are those who are both actively seeking and have actually achieved a total new lending over the previous six months of at least £75m in typical loan sizes of above £20m. Aviva is also classed as a big ticket lender by Savills.
Savills UK head of valuation William Newsom said the moves by the insurers’ followed a retrenchment in lending by the banks, which have been focusing on reducing their pre-recession heavy exposure to property.
He said: “This is extremely positive news for the market. Many of these banks have meaningful quantities of money to lend, albeit most of the German Pfandbrief-backed banks find loan to values (LTVs) above 50% challenging. Many banks are constrained by regulatory and capital adequacy issues, notably under Basel III, with a result that there is downward pressure on LTVs and upward pressure on interest rate margins. Margins probably have increased by 25 basis points over the last quarter, albeit against a background of continuing low cost of money.”
The capital requirements in Solvency II also make it more attractive for insurers to lend to property companies rather than hold the assets themselves.
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