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While liquidity in the European banking sector is improving, the demand for debt is "woeful", says WestImmo London branch head Peter Denton.
"The level of refinancings is pretty poor, the level of real acquisitions and trading is also poor," he said.
Denton was speaking yesterday at the annual conference of the Association of Property Bankers at SJ Berwin’s offices in EC4.
"There is liquidity within the wider European banking market. An enormous proportion of it is focused on the UK because the perception is that it is at the bottom of the cycle," he said.
Among the sources of debt, Denton said there were currently no investment banks lending, but there were plenty of German lenders.
He added that along with the usual lenders – commercial and nationalised banks – there were new contenders which were not banks, including AXA.
"We think there will be others, the Prudential is looking at it," he added.
"It is also difficult to ignore the mortgage REITs in the US that have been launched and the continued dominance of that market by the life companies and how that interacts into Europe will be an interesting question."
Denton said one key issue for the sector in coming years was the amount of debt that had to be refinanced and the likelihood of a successful negotiation between borrower and lender.
"There’s about £300bn outstanding debt in the UK – about £250bn of bank debt and £50bn of CMBS," he said.
"Roughly 80% of that matures in the next five years - £50bn a year.
"There may be £35bn (at most) allocated to the UK this year for new debt, but a long way off what needs to be refinanced."
Denton said borrowers who purchased in 2001-03 had probably suffered just a 15%-20% fall in the value of their assets in this downturn and had a good chance of refinancing.
Those that borrowed in 2004-05 had seen values decline by between 25%-30% and might be ok to refinance "on a good day".
"If you did anything in 2006 and 2007, you’re screwed," he said.
nathan.cross@rbi.co.uk
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