Lending caution leads to drop in outstanding loans to property development

Outstanding loans to property development fell 7% among UK banks in 2016 as traditional lenders took extra caution toward commercial property. About £14.8bn of loans to development was outstanding at the end of December 2016, down from £16bn a year before. Although there was a small rise to £15.2bn in the months following the EU referendum, the number dropped back down to July levels at the end of the year. UK banks’ lending to development and standing property as a whole also fell steadily as a proportion to their total loan books in 2016. In January, property made up 7.5% of banks’ outstanding loan book but that fell to a record low 7.2% in November before a slight bounce back to 7.3% in December. Despite the small rise, lending to development shrunk by £190m that month. Liam Brooke, co-founder of peer-to-peer lending platform Saving Stream, said: “There is a wealth of good investment opportunities out there and although banks may be paring down lending in the sector, it is business as usual for alternative finance providers. “Despite Brexit, the advantages of investing in UK property remain in place. Interest rates are likely to stay low, while the UK’s housing shortage is unlikely to be resolved any time soon.” Between February and December, Saving Stream’s loan book more than doubled from £100m to £242m with 75 new loans. Its biggest loan was a £15m facility for a conversion of the Sunbeam motorcycle factory in Wolverhampton into flats. OUTSTANDING LOANS TO PROPERTY IN FIGURES   Value of outstanding loans to property developers, UK banks (£m) December 15 15,970 January 16 15,971 February 16 16,742 March 16 14,967 April 16 14,865 May 16 14,834 June 16 14,828 July 16 14,894 August 16 14,806 September 16 15,203 October 16 15,198 November 16 15,215 December 16 14,838 LENDING TO COMMERCIAL PROPERTY (£m) Lending to standing property Lending to new development Net lending January 16 -472 4 -468 February 16 1,158 -22 1,136 March 16 1,655 -206 1,449 April 16 -142 -48 -190 May 16 294 227 521 June 16 996 13 1,009 July 16 98 89 187 August 16 -210 -66 -276 September 16 388 39 427 October 16 -125 17 -108 November 16 -485 38 -447 December 16 684 -190 494 • To send feedback, e-mail karl.tomusk@estatesgazette.com or tweet @ktomusk or @estatesgazette