An ‘unprecedented’ number of new lenders has entered the UK property financing market in the last 12 months, of which over half are non-bank institutions, according to new research from Savills.
An ‘unprecedented’ number of new lenders has entered the UK property financing market in the last 12 months, of which over half are non-bank institutions, according to new research from Savills.
The real estate adviser has identified 52 new entrants to the UK lending market, taking its list of organisations with ambitions to lend to over 200 names. In addition, 63% of the 104 new entrants (by number) over the last two years fall into the 'other lenders' category, signalling a substantial presence from non-banks.
The research was presented to lenders in the City of London on Tuesday under the theme ‘Growth is here. Are the foundations solid?’
William Newsom, senior director at Savills, commented: ‘At last year's presentation, I noted that I had never before seen this level of lending ambition, and this year we have seen this level of ambition increase further with another 52 new entrants being identified. However, the pool of opportunities is not equivalent to lending aspirations, which will impact the market.’
According to Savills, the mismatch between market opportunities and lender ambitions is increasing. Whereas the market opportunities for lending currently stand at £40 bn, lender ambitions are far greater at £75 bn.
The increased competition has driven interest rate margins down and LTV ratios up. Moreover, lenders’ ambitions in terms of geography, risk and sector are also increasing.
Newsom: ‘Obviously, the lending margins will reflect the increased risk from what was previously prime but we are certainly not seeing any signs of reckless lending with loan to values remaining vastly lower than since these records began.’
The firm highlights three specific areas of opportunity for lenders: specialist property types (student accommodation, healthcare, pubs, data centres and self-storage); properties requiring an understanding of the fundamentals (development finance, value-add opportunities such as refurbishments and secondary shopping centres) and general categories (small ticket <£5m, new customers and bridging finance).