Evidence for a systemic shift in lending landscape is still thin

It is still too soon to say whether the arrival of new players in the real estate finance market will lead to a systemic shift in the European lending landscape.

The fact that there is now more choice for borrowers is certainly positive, according to Daniel Mair, partner at Ernst & Young. But it is still too soon to say whether the phenomenon is a temporary blip or whether it will be long-lasting, he told PropertyEU's Debt Finance Investment Briefing last week in Frankfurt.

‘It depends on a number of factors: the complex regulatory regimes, macro-economic uncertainties and whether new entrants make money. Some of them don’t have a track record. It could well be that new entrants will develop business models that don’t work.’

Christophe Murciani, director of debt advisory at Jones Lang LaSalle in Paris, does not believe a systemic shift is occurring. ‘I don’t think we’re seeing that in terms of volumes. But new players are changing the way lenders see the market and where the value added lies. We’re seeing different lender behaviour and moves to define a more specific business plan.’

Some lenders are seeking higher returns by focusing on higher LTVs and ticket sizes, while others are focusing on regional markets, development or value add strategies or areas where banks are retrenching, he added. ‘The development finance market is still lagging, but overall we have reached the stage that the risk return spectrum is now fully recovered.’

Derk Opitz, senior associate at law firm Ashurt, sees ‘much upside’ in new players entering the real estate financing market, particularly for borrowers. ‘They can go to a local pension fund and get a loan without a 3-page covenant. The competition is growing fiercer for banks, but I don’t know whether it’s all positive. Pension funds are not subjected to the same regulatory environment. That makes it more difficult for banks to compete.'