International real estate adviser Savills has said lenders working in partnership as much as possible with their clients is key to bankers getting their money back. In its annual financing property presentation for the UK in the City of London this week, Savills estimated that the sector has reached £50 billion negative equity levels.
International real estate adviser Savills has said lenders working in partnership as much as possible with their clients is key to bankers getting their money back. In its annual financing property presentation for the UK in the City of London this week, Savills estimated that the sector has reached £50 billion negative equity levels.
According to Savills, lenders with large existing loan books find themselves having to continue their responsibility to lend as with a lack of liquidity in the market, debt will stay in the system for the short to medium term. The current annual lending capacity in the market stands at about £20 bn, a quarter of the amount of business transacted in 2005, 2006 and 2007 and only 50% of the value of loans due to mature in each of the next three years.
Savills, therefore, urges enders to work in partnership where possible with their clients to achieve stabilisation in a market in which commercial property values have fallen 41% over seven quarters, compared to 26% over twice that time period in the previous downturn (October 1989 to April 1993). William Newsom, head of Savills UK valuation, said: 'Debt is locked into the sector and lenders need to work towards stabilisation to see a return on their money. Deleveraging at this stage will result in significant losses and so we are seeing lenders sticking with existing customers and extending loans by one, two, three, five and in one case even eight years.'
