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Market Trend Analysis 2019: UK Real Estate Finance

15 April 2019 / Link Asset Services

This report is part of Link’s drive for greater transparency in the UK real estate debt market, giving lenders and borrowers alike a view on optimal financing terms in a number of key market segments. We have analysed market trends through our datasets across the last three years and assessed market prospects for 2019 as a whole. As with previous reports, we focus on lender sentiment, appetite, intentions and projections for the year ahead.

The number of lenders expecting their origination teams and loan volumes to grow in the year ahead fell quite noticeably, by -10% and -18% respectively.  This is significant as the data had previously been consistent showing just a 1% variance in both from 2017 to 2018.  

Although not as strong as 2017, it is recognised that 2018 was another good year for transactional volume; this supported very strong debt origination. Lenders are clearly less confident about their prospects in 2019 but still see upside possibilities on origination volume.  This is broadly in line with market consensus which indicates a soft landing despite the continuing risk of a no-deal Brexit. 

There is a very strong consensus for the UK Base Rate and UK Treasury Gilts to remain stable during the year.  Most respondents had forecast an increase in last year’s survey and that was realised in the latter part of 2018, although Gilt rates have since declined. This year’s predictions are in line with market forecasts. 

Leverage and pricing are expected to remain similar for the next 12 months with most risk highlighted on the downside to LTVs. Despite the market risks, transactions are taking no longer to complete than they were a year ago, still averaging 52 days from agreeing terms to drawdown of funds.

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