Property lenders are bullish about post-Covid growth this year, as the vaccine rollout has boosted market confidence.
According to Link Group’s 2021 Market Trend Analysis report, two-thirds (64 per cent) of property lenders anticipate new loan originations to increase this year and only six per cent predict a fall compared to 2020.
The majority of lenders expect a reduction in new loan pricing, which the report said shows that lenders in general are eager to get money out the door in 2021.
More than half of property lenders (52 per cent) expect to increase the size of their team in 2021 as the sector looks to build back.
The report found that the success of the UK vaccine rollout has significantly increased confidence, with appetite for UK business growing, and this is expected to prompt a further rise in loan-to-values as the year progresses.
Link Group revealed there has been an increase in ticket size for investment loans which it said indicates a more optimistic view for investment, especially those in sectors which have now demonstrated themselves to be resilient to the events of the last 12 months.
It also showed that there has been an opportunity for alternative lenders to meet demand for refinancing and new project funding as banks became more cautious in their lending.
“The last year has brought extraordinary change to the real estate market, and with it, we have seen huge opportunities develop,” said Tim Schuy, head of real estate finance at Link Group.
“As the UK’s big clearing banks stepped back from new business so as to limit the impact of what is now riskier lending on their capital ratios, the field has opened up for alternative lenders to meet demand for refinancing and new project funding. This has resulted in overall stability in pricing and limiting the reduction in sector-specific availability.
“Levels of uncertainty in the sector are certainly higher than usual, something that is to be expected in the wake of a once-in-a-generation global pandemic. We will have to wait and see just how quickly and sustainably the economy can reopen and what that means for the real estate market.
“But the levels of optimism within the sector are hugely encouraging, and lenders are eager and well placed to seize the growth opportunities that the next 12 months provides.”
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There has been a noticeable drop in availability of loans generally across all sectors but the industrial and logistics, retail, hospitality and leisure sectors have been hit the hardest, the report said.
Lenders are more interested in Europe this year than they were in 2020 and Ireland is registering the biggest surge in appetite with a 14 per cent increase, taking it ahead of Western Europe as the most popular non-UK European location.
The report said the strength of ties between the UK and Ireland makes it a natural first port of call for UK-based lenders looking to diversify away from the domestic market.