Commercial property finance in sharp drop over Brexit fears
Banks reined in lending to the under-pressure commercial property sector for the first time in four years in the run-up to Brexit vote amid fears over a collapse in prices, according to a Bank of England report.
The Bank’s credit conditions survey revealed that the availability of finance to the sector dropped sharply in the second quarter, having not fallen since the same quarter in 2012, as lenders became spooked over price drops.
The report also showed that banks are expecting to clamp down further on lending. More than £18bn in commercial property funds were frozen last week after a rush by investors to pull out their cash following the vote to leave the EU, which sent financial markets deep into the red at one stage.
Aberdeen Asset Management — one of seven funds to suspend trading in its commercial property fund — has now lifted the lockdown imposed on its £3.2bn fund. However, last week cut the fund’s value by 17% in what marked the largest reduction yet.
Bank of England governor Mark Carney has cautioned over the outlook for the sector as commercial property prices are expected to be hit by the Brexit decision.