Non-bank lending rises 80% in 2012

The decline in commercial mortgage-backed securities (CMBS) persisted into 2012, with a fall of 14%, according to DTZ’s Money into Property 2013 Europe report.

However, non-bank lending provided by institutions or debt funds surged 80% to €34 bn from €19 bn in 2011. A growing number of property companies are also raising public debt through corporate bonds, the report found.

According to DTZ's research, more than €15 bn was raised in 2012 through corporate bonds. 'This represents a 70%
increase over the year and is a record high since 2006,' said Nigel Almond, head of strategy research at DTZ.

While the figures point to structural changes in the European lending landscape, private debt is still dominated by the commercial banks which claimed 96% of market share over the year. However, loan originations is growing vis-à-vis extensions.

In 2012, half of the respondents to the survey showed an increase in the value of new originations. The positive balance in new loan origination is ‘somewhat surprising’, the authors said, given the challenging market conditions especially in Europe. Now that many banks have separated their non-core divisions, the analysis could reflect more upbeat sentiment in new lending teams, the report concluded.

Looking forward to the current year, the report signalled expectations for growth in loan book size, especially from traditional banks with a net balance of 11% expecting an increase. Banks are also expected to be net lenders again this year, with a net 19% expecting their availability of debt to increase. A year ago, a clear majority of investors felt that lending would be down from banks with institutions picking up the slack. A higher proportion of respondents also expects an increase in debt this year from institutions, along with other sources of finance.

Progress in working out problem loans is also well underway, the report found, with 69% of lenders reporting some substantial progress in working out non-prime assets compared to 42% in 2011.

Secondary assets and markets are also gaining traction: over half the lenders polled indicated they have lent against both secondary assets and assets in Tier 2&3 cities. While banks remain more conservative in what could be called their traditional playing field, alternative lenders appear to be more active in these markets, the survey found.

In terms of performance, investors are rather downbeat for the year with most respondents expecting direct real estate to underperform relative to both equities and real estate equities in 2013. However, a majority of 72% expect real estate to outperform bonds.

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