Soured British commercial property loans cut by half as values jump

Bloomberg

Rising property values enabled lenders in the U.K. to reduce defaulted commercial-property loans on their books by almost half to about 12.1 billion pounds ($17.5 billion) last year, a survey showed.
The amount remaining in default fell from 23.2 billion pounds at the end of 2014, according to a survey of lenders by Leicester, England’s De Montfort University released Tuesday by the British Property Federation.
U.K. commercial property had a total return from rental income and price gains of 11.2 percent in the 12 months through April, according to data compiled by MSCI Inc.
Lenders responded to the increasing values by advancing more credit. The total amount of outstanding commercial property debt is now 168.4 billion pounds, 1.9 percent more than a year earlier and the first increase since 2008.
“The fall in value of distressed loans to very low levels coupled with a gradual increase in new loan originations hints at a robust and stable commercial property lending market,” said Ion Fletcher, director of finance policy at the British Property Federation.
The market share of U.K. banks and customer-owned lenders fell to 34 percent of new loans, the lowest ever recorded by the research, from 39 percent in 2014.
Insurers were the second largest lenders, with 16 percent of the market. The university has carried out the survey since 1997.