The De Montfort University Commercial Property Report found that the Brexit negotiations have so far not had an effect on the number of loans for commercial property.
Published in April 2017, the report showed that although lending was down by 17% in 2016 compared to 2015, the vote to leave the European Union made little difference to lending activity.
In the first half of 2015, £21.4bn was loaned for commercial property and this rose to £23.1bn in the second half of the year which covers most of the post Brexit period. UK banks and building societies provided 44% of commercial development lending. Most non-banking and foreign lenders lent less than in previous years.
The report noted that the commercial property market was strong in 2016 with strong property values and high demand. The report said that there was more lending on London properties – 63% of the total lending was for property located in the London region.
Ion Fletcher of the British Property Federation said that despite the government promoting economic growth in the regions, there was still a bias towards London lending.
Interest rates for commercial mortgages remain low, although they did increase slightly in the last part of 2016. Strong competition amongst lenders mean that lenders’ profit margins remain low. Large lenders have been cautious with their lending criteria, but many smaller lenders are prepared to say yes to higher risk loan applications in return for higher interest charges and increased profit margins.
The average loan to value ratios declined in 2016. By the end of the year, most loan-to-value ratios were 60% or below.