Key findings of the Market Trends Analysis for 2018 include:
- Confidence abounds at the start of 2018 with a significant majority of respondents expecting loan volumes and team sizes to grow.
- Lenders have converged on leverage offered for investment loans but show far greater sensitivity to risk for development loans.
- Pricing has only increased in the higher risk categories of debt; mezzanine, preferred equity and bridging finance; but has done so considerably.
- The supply of long term debt continues to grow. With many expecting rates to rise, locking in low fixed rates of interest now may be a shrewd move.
- Lenders' preference has shifted into industrial/ logistics assets and hotels and away from the residential and retail sectors.
- Property values in the residential market are considered to be more at risk than those in the commercial sectors.
James Wright, Head of Real Estate Finance
"The story is one of lenders learning to live with political uncertainty and adapting lending practices accordingly. We look set for an increase in lending activity in 2018, with current political risk not enough to undermine confidence.
"One way in which lenders have adapted is by doubling down on low risk senior finance. We have seen margins lower on senior debt but rising on risker lending products. In addition, this year lenders want to do relatively more lending in commercial sectors in comparison to residential, where they see greater risk to values in the year ahead."