UK bank lending slumps to Lehman collapse levels: JLL

UK bank lending to real estate has dropped back to the levels seen in the period immediately after the collapse of Lehman Brothers, according to global property adviser Jones Lang LaSalle.

Lending to real estate has dropped to £188 bn (EUR 218 bn), a 22% decrease on levels seen a year ago as shown in the latest Bank of England quarterly lending figures. UK bank exposure to real estate (i.e. the proportion of lending to real estate as a percentage of total lending) remained static at 9% from Q1 2011.

Jeremy Handley, European director of valuation advisory at Jones Lang LaSalle commented: 'That there has been no change in lending to real estate was not unexpected and reflects the stagnant state of the UK market. Real estate workouts are taking longer than in 2010 and earlier this year, and this has very much been a feature of the sector since Q1 2011.

'We do not expect to see any significant change in debt availability until lenders receive further clarification on the situation in the eurozone. Lending in the secondary/riskier end of the market is unlikely to restart until there is more confidence in both the wider financial markets and also signs of economic stability and growth.'

JLL said there are signs that banks are starting to investigate their loan book sales. 'RBS and Lloyds being two notable examples currently in the market,' added Barry Osilaja, European director of corporate finance at Jones Lang LaSalle. 'However, this has not been widespread and we are yet to see any significant deleveraging come through in the bank lending figures. Deleveraging should be occurring in the secondary markets but activity in the sub-prime market in Q3 2011 was almost non-existent.'