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Property debt hangover clearing as banks reduce loan books

Outstanding debt held against UK commercial property fell to £171bn at mid-year 2014 from £180.3bn at year-end 2013 as lenders continued to reduce their loan books following the 2009 financial crisis, academics at De Montfort University have found.

The half-year De Montfort Commercial Property Lending Report, the most comprehensive analysis of the UK’s commercial property lending market, observed a significant rise in new lending to the sector in the first half of 2014, increasingly from organisations other than UK banks and building societies, and at better terms for borrowers. It also found a significant drop in the volume of old loans that were distressed or in breach of financial covenants.

However, it noted that this recovery was felt unevenly across the country, with organisations much more willing to lend against assets in London than elsewhere, and also more inclined to lend against investment properties rather than new development.

New lending accelerated during the period with £19.6bn of new lending – the highest total recorded by the study since 2008 – compared with £13.4bn in the first half of 2013 and £29.9bn for the whole of 2013.

However, it noted that the increase in activity generally in the commercial property market was not ‘debt fuelled to the same extent as occurred before the financial crisis.’

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