subject: The Commercial Mortgage Market Will Remain 'Limited' in 2011 [print this page] The Commercial Mortgage Market Will Remain 'Limited' in 2011
There is still a lack of commercial mortgages and business finance in the property according to a new study from a leading UK property group. Jones Lang LaSalle's 2011 Lenders' Expectations Report has uncovered that lenders see a difficult twelve months ahead as the anticipate lending less in 2011 than they did in 2011.The report surveys lenders' commitments to commercial mortgages and property in the UK. Whilst more of those questioned were willing to lend between 50 and 100 million in 2011, fewer thought they would be willing to lend above 100 million.So as you would expect the issues that have affected the global economy are having a significant impact on the UK commercial property market and the consequential knock on effects for business are impacting growth.And this is all backed up by the statistics with borrowing on property falling by 7% in the last three month of last year and commercial lending falling to an all time low. Is it time to jump of a bridge then, finish it now? Maybe it is time for some optimism, founded or unfounded! OK so it doesn't look so good for this year but next year, 2012, the report suggest a recovery with commercial mortgages exceeding half a billion!The vast majority of those interviewed for the survey cited a ceiling Loan to Value (LTV) ratio of between 60 per cent and 70 per cent in 2010, though several believe this figure will stay below 60 per cent over the next couple of years. Most lenders do not expect commercial lending to be on offer at rates over 70 per cent in the next decade owing to legislation, new regulations and a lack of available cash.There was a degree of optimism from a minority of lenders on the issue of LTV; many lenders expect commercial mortgages to be available at higher LTVs from 2012. Just 37 per cent expect the maximum LTV to be above 70 per cent although none expect to see loan to values above 80% by 2013.The growing office sector is by far the most popular area in commercial property in attracting new lending. The sector an average weighting of over 40 per cent for each of the last three years. Commercial lenders are confident that the commercial office market is the easiest to profit from and the most transparent which is why they are more likely to consider commercial lending in this area, especially in London.Andrew Hawkins, a lead director in City Investment at Jones Lang LaSalle, said: "The lending markets are quick to change and fluctuate, and it has become clear throughout our interviews that credit conditions are shifting. A year ago we were predicting greater liquidity than we are now experiencing and the outlook is similarly challenged. There is without a doubt a polarising of debt provision with borrowers with strong existing relationships are well placed to access the lending markets, whilst although not impossible for new entrants, the challenges are still there."If you are thinking about building a portfolio of commercial property, it could still be a difficult couple of years ahead. You are going to have to put down a higher deposit than you normally would have to (around 30-40 per cent) and there is also likely to be some major restrictions on which lenders you can do business with, particularly if you are looking for a large loan.
