U.K. lenders saying they are likely to provide development project finance in the coming five years rose to 66 percent from just over half of respondents a year earlier, according to an annual survey published today by construction consultant EC Harris. In mainland Europe, there was a 7-point drop from last year to 48 percent because of concerns over the euro region’s sovereign-debt crisis.
Banks account for 94 percent of real estate lending in Europe, or 2.4 trillion euros ($3.1 trillion), and may reduce loans by as much a 25 percent in the next three to five years to meet tougher capital rules, Morgan Stanley estimates. Just 17 percent of respondents in the EC Harris survey said they increased real estate lending in the past 12 months, while 48 percent reduced their loan books.
The research indicates that fewer banks are willing to finance projects outside their home market, EC Harris said. The exception is Spain, it said.
Few banks would be willing to provide loans for projects without a tenant commitment to lease part or all of a proposed development. Seventy-four percent said they would lend for real estate planned by developers that have backing from established investors, such as money managers or sovereign-wealth funds.
EC Harris, a unit of Arcadis NV, (ARCAD) surveyed 29 banks that provide loans backed by real estate in eight European countries.
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