Realtor Savills is estimating that the commercial property market may soon experience a boom, after it emerged that 50 new lenders have entered the sector.
The news was revealed at Savills' 25th annual financing property conference in London earlier this week (June 4th). Out of the new lenders, 47 of them have stated that they can lend at least £100 million, which bodes well for the market. However, analysts are cautious of the fact that most of these lenders are actually offering money against the same type of product: primary property in London.
This means that a lot of secondary property, especially outside of the capital city, is being snubbed.
According to recent research by De Montfort University (DMU), 70 per cent of current loans are actually on properties outside of London, but this trend may not last if these new lenders continue to focus on the capital city.
William Newsom, Savills' senior director, said: "Lenders need to look beyond immediate cash flows and rediscover the joys of the regions and good secondary product as much of it remains underpriced and can offer better security in terms of future growth and value."
Furthermore, Savills has suggested in a report that the main banks will need to be more fierce in their writedowns before values fall even more, considering that new commercial property lending totalled £32.4 billion in 2012, way lower the long-term average of £42.5 billion. This news of the lenders may spark excitement for investors, but they will have to wait with bated breath on how it will play out.
Meanwhile, the residential sector seems to be showing optimism, especially fuelled by both the Funding for Lending and Help-to-Buy schemes. Savills reports that there could be an extra 156,000 home transactions by 2016, forcing a 30 per cent rise in the rate of homebuilding.