Banks are continuing to deleverage their property loan books in a bid to lower their exposure to real estate, according to DTZ’s latest Money into Property report published on Thursday.

Banks are continuing to deleverage their property loan books in a bid to lower their exposure to real estate, according to DTZ’s latest Money into Property report published on Thursday.

The reduction is being driven by bank lenders in Europe, in contrast to the US where net lending was up for the first time last year since 2008.

Following efforts in the past few years to tackle their bloated loan books, bank lenders in Europe are expected to make further progress this year with 80% indicating that they are working through their non-prime problem loans.

Last year private debt (which includes loans by commercial banks, insurers and institutional lenders) fell by 4% to €1.4 tln in Europe, driven mainly by loan sales and writedowns in the UK, Spain, Ireland and the Benelux.

‘I think we are close to the end of the deleveraging process in Europe, certainly in the UK,’ Hans Vrensen, global head of research at DTZ, commented during a webcast on the report. ‘Some markets such as Italy and Spain are still in the middle of that process and I think we may see a long tail to some of the workouts there. But there is light at the end of the tunnel,’ he said.

Progress on workouts for prime loans appears to have accelerated with close to half of the respondents to DTZ’s annual survey now reporting that these have been completed. Surprisingly, the firm notes, 7% of respondents say their workout of prime loans has yet to start.

‘In Europe challenges remain for many European banks, many of which have yet to make significant writedowns,’ DTZ said. ‘They have been able to avoid these so far by benefitting from central bank supports over recent years. However, we do anticipate that this will change in 2014.’

DTZ's findings on lender and investor sentiment are based on opinion polls of close to 200 individuals conducted in March and April 2014.

Click on the attachment below for the full DTZ Money into Property 2014 report