More than a third of Loan Market Association (LMA) members who voted in a recent European real estate finance survey said that they believe the property market is at the peak of the cycle.
The survey of members from 17 countries was run ahead of the industry body’s fourth real estate finance conference which was held in London yesterday (11 May). It also revealed that many members expect a downturn in 2018, see low interest rates as a major driver of the industry, and view macroeconomic uncertainty as the sector’s greatest threat.
At total of 36.6 percent of respondents said that the market is at the peak, although 24.2 percent said that it was still at the expansion stage of the cycle. A total of 14.9 percent said that the market was already contracting, while 19.1 percent said it was stabilising.
Asked when the next property downturn would occur, more than a third (32.5 percent) said 2018. However, 2017 was also a popular choice, with 23.2 percent of respondents saying they expect a downturn next year. An optimistic 15.5 percent voted for 2020 and beyond.
Economic fundamentals such as low interest rates were selected as the biggest driver in commercial real estate by 46.6 percent of respondents, followed by access to funding in the equity and debt markets by 34 percent.
Macroeconomic uncertainty caused by factors such as the UK’s referendum on EU membership was voted by 57 percent of respondents to be the greatest challenge to the sector this year.
On the question of which lending source will demonstrate the greatest growth in the real estate finance market in 2016, 46.2 percent thought that it will be debt funds. Banks were voted by 19.3 percent of respondents, with insurers and pension funds at 13.5 percent each. CMBS was voted by just 4.7 percent, with sovereign wealth funds at 2.8 percent.
A global economic slowdown was considered to be the greatest concern for borrowers in global real estate during 2016, according to 52.7 percent of respondents. Geopolitical uncertainty was chosen by 39 percent, while just 7.1 percent singled out regulatory burdens.
Alternative assets such as student accommodation, healthcare and retirement homes were regarded by respondents as the sector which hold the greatest investment opportunities this year. While other sectors such as residential, offices and industrial all polled below 20 percent, alternative assets was voted for by 49.1 percent.