Debt which was held against commercial property in the UK fell to £197 billion by the end of 2012.
Not only is this a decrease of 7.7 per cent compared to the end of 2011, but this debt level has gone back to amounts seen in 2007 before the global financial crisis hit.
The figures by the De Montfort UK Commercial Property Lending Market Survey were revealed at the Nottingham launch by co-author Bill Maxted, who suggested further that badly performing assets on the market are now far less. This means that the market is becoming more polarised. For example, secondary property outside of London and the south east of England was not popular enough for investors in 2012, especially driven by lenders not wanting to secure money regionally.
This has not only sparked major competition for primary property in the capital city but it has also plummeted borrowing costs for such sites. Furthermore, secondary and tertiary properties are so much in decline that their LTV ratio have exceeded 100 per cent, meaning that investors want to go nowhere near them.
It does seem however that 2013 may have turned this trend. According to IMA Property, net retail sales stood at £98 million in April 2013 for secondary sites, which is a mammoth rise from the £33 million recorded the month earlier. As rates continue to rise dramatically in the capital city, many property managers are aiming to look outside of London for secondary tier property in order to save costs.
This amended debt figure comes after a Investment Property Forum meeting estimated that the total value of commercial property debt stood at £268 billion.
The results are based on a sample of 78 lending firms across the UK.