UK – Loan requests for smaller, non-core property acquisitions outside London have increased in 2013, according to a new real estate debt study.
Laxfield Capital's UK CRE Debt Barometer, which analysed more than £25bn (€30bn) of debt requests from UK real estate investors, found that loan-to-value (LTV) ratios increased during the first 10 months of the year, while requests for mortgages below £50m increased substantially.
Emma Huepfl, head of capital management at Laxfield, said the new bi-annual report, launched today, would complement existing property debt studies and could serve as a "predictor of future lending activity".
Laxfield, which manages real estate debt investments on behalf of institutional lenders, including Cornerstone Real Estate Investors and Singapore sovereign fund GIC, analysed 268 requests for financing from property investors.
"They are loan requests we have received or, indeed, deal opportunities that we have been following," Huepfl said.
The results show a gradual move away from the predominance of large-ticket London deals and, in particular, refinancings, suggesting that risk appetite among UK investors has been on the rise.
"The focus is not so strongly on the core, safe-haven assets as it was, and it is trickling out of London into the regions and to smaller deals," Huepfl added.
According to the report, the average LTV request increased from 43.6% in Q1 to 58.3% in Q3, "stimulated by enhanced market activity and improved confidence in the availability of financing".
Demand for refinancing dominated the UK lending market in 2013, representing 67.9% of all activity over the whole period, but this proportion actually fell from 89.7% at the beginning of the year to 42.4% in Q3.
The proportion of loan requests below £50m increased from 20.4% at the beginning of the year to half by Q3.
Average deal size in London, which was just below £100m, stayed relatively constant through the year, but the average size of regional and national deals more than halved from £157m to £61m.
The report said: "This trend reflected a move away from bulky refinancings as greater investment activity in the regions created new lending opportunities."
There were more loan requests for offices (38.1%) than for any other sector, but demand for alternative sectors rose from 20% at the beginning of the year to 30.5% in Q3.
"We see some really strong indicators of confidence through this barometer," Huepfl said. "The market would be very keen to know of any signs of overheating, but we are certainly not there from the statistics that we've analysed."