Higher loan-to-value ratios as rates stay low

 
Kasmira Jefford
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PROPERTY investors’ appetite for debt at higher loan-to-value (LTV) ratio has soared in the last six months thanks to the improving economic outlook and the low interest rate environment.

Laxfield Capital’s latest UK commercial real estate barometer out yesterday found that half of all requests surveyed were for loans with LTVs above 65 per cent compared with 35 per cent six months ago, in a sign that investors are prepared to take on more risk.

Emma Huepfl, head of capital management at Laxfield said: “The economic outlook and low interest rates have produced more interest in longer duration finance, which UK investors have been slow to respond to previously.”

The real estate debt investment manager, which draws on a total sample of £58.8bn loan requests across 624 deals gathered since January 2013, said volumes were in line with the average of the last three years, with loan requests totalling £11.3bn in the period.

The weighted average of LTV ratios remained steady at 56 per cent, with demand split between REITs and family offices, which take a conservative approach to debt and a growing group of returns-driven investors seeking high-leverage debt.