Europe’s property loan portfolio market could top €100bn this year, according to research by PwC.
The firm said the continent’s secondary market for loan portfolios is set to grow this year, with around €40bn in progress.
Richard Thompson, PwC partner, said real estate-backed assets continue to be a ”major focus” for large investors. “We expect this asset class to dominate deals in 2015,” he said.
Richard Thompson said that, while Ireland, Spain and the UK will continue to be strong this year, significant growth in activity in the Italian, Dutch and Central & Eastern European markets is likely.
The markets, which accounted for less than 10% (€9bn) of transaction volumes last year, could more than double in size to around €20bn this year.
“The market continues to be dominated by major financial investors, all of which have significant committed funding,” Thompson said. “Many are looking at emerging European economies to escape the high levels of competition in UK, Irish and Spanish markets.”
European loan portfolios with a face value of €91bn were sold in 2014, up from €64bn the previous year.
Commercial real estate lending dominated transactions last year, accounting for over half deals done – €49bn in face value, up from €18bn the previous year.
Thompson said the loan portfolio market ”really came alive” in 2014.
Research from Capital Economics found that the outstanding stock of property debt in the UK fell from £177bn to £158bn last year, or from 8.9% to 8.2% of bank and building societies’ overall loan books. The banking sector’s exposure to property has now fallen by a quarter since peaking in mid-2009.
Cushman & Wakefield’s EMEA corporate finance team, meanwhile, recorded €80.6bn of closed European commercial real estate (CRE) and real estate owned (REO) transactions in 2014 – more than two-and-a-half times the volume recorded in 2013.
The advisory firm said that, although it is anticipated that it will be difficult for 2015 to reach the €80bn mark, there are early signs ithat investors remain hungry for distressed European assets. Between €60bn and €70bn of closed CRE loan and REO transactions are forecast in Europe for 2015.
PwC said last year’s Asset Quality Review brought to light €136bn of troubled bank loans which may require reclassification on balance sheets.
Thompson said: “Whilst some of the 2014 deals were in part AQR driven, I expect this to play a bigger role in deals in 2015 and beyond.”
PwC research shows that banks continue to hold more than €2tn of unwanted lending.
