As lender activity warms up, signs emerge of debt-market defrost


Finally, there are signs that the Ice Age that has enveloped the debt market since the 2008 financial crisis is starting to thaw.

Banks are starting to lend more, not just on the obvious prime real estate, but on selected good-quality secondary; loan syndications have picked up a little (see more); and this month investors stampeded into the Taurus-2013 CMBS. Gagfah’s securitisation of German multi-family housing was so successful the company will be increasing the size of its next issue by around 50% (see Growing appetite for… and Thirst for yield sees…).

All this is welcome news. Someone other than banks has to be willing to lend, to hold real estate IOUs. In the past year, and particularly in the past six months, these lenders have emerged: insurance companies, pension funds, debt funds and asset managers. In a low interest-rate world, where sovereign bonds and other debt are yielding little and/or looking dodgy, real estate’s asset-backed income flow looks good. Some of these new entrants are in it for the long-term, others are flightier.

But a word of caution. Lenders and debt investors are still very picky. There’s a long way to go before the ice melts in the further reaches of the real estate market (see more). In addition, the debt markets are being manipulated by central banks. Quantitative easing is keeping interest rates artificially low; in the UK, the government’s Funding for Lending Scheme is pumping more cheap money into banks.

At some point, the tap will be turned off, interest rates will start to rise, and real estate may no longer look quite as good.