Bank lending in sterling to real estate improved by £3.2 bn (EUR 3.7 bn) in Q1 2010, after falling over the last two quarters. Total lending reached £246 bn (including lending by building societies), according to a report by Jones Lang LaSalle based on the latest Bank of England lending figures.

Bank lending in sterling to real estate improved by £3.2 bn (EUR 3.7 bn) in Q1 2010, after falling over the last two quarters. Total lending reached £246 bn (including lending by building societies), according to a report by Jones Lang LaSalle based on the latest Bank of England lending figures.

Year-on-year growth in the volume of real estate lending improved only marginally, from £1.9 bn in March 2009 to only £2.3 bn in March 2010, the second lowest growth recorded since March 1997.

The issue of major balance-sheet lenders distressed loan books remains a significant obstacle to any return to true normality in both the UK banking and real estate markets. Jeremy Handley, Director in Jones Lang LaSalle’s Valuation Advisory team, commented: 'The slight increase in bank lending is indicative of the continued caution in the lending market and suggests that the expected wave of bank-led property disposals has not commenced.'

He added that he did not expect property disposals to start on a wide scale in the near future. 'There has been some evidence of security being enforced and LPA receivers or administrators being appointed, although most banks are restructuring where possible by following a policy of ‘extend and amend’. Where loans are at risk of not fully repaying at their scheduled maturity date, but the sponsors are still servicing their interest, lenders are simply extending loan maturity dates in return for a quid pro quo, such as an increased margin or additional back-end fees. Lenders may also seek to claim a share in any upside in acknowledgment of their new position of increased risk.'