Despite the recent bounce in prime property values, this survey shows the true state of the whole market - not just the shiny tip of property's debt iceberg. Worryingly, 2009 proved far more grisly than 2008. A whopping £22bn worth of property loans have defaulted - a 600 per cent rise on the previous year - and loans worth £28.3bn have breached their loan-to-value covenants. This is a 165 per cent increase on 2008, and market watchers fear the true figure is actually much higher.
This year, £52.6bn of debt secured against real estate assets will mature and require refinancing. A large proportion of this total has already been rolled over from extensions to loans that matured in 2008 and 2009, and to make matters worse, a further £67bn will mature in 2011-12. Just £15bn of new lending was advanced to property companies last year.
For the few banks that are still lending, it is a very profitable game to be in. The survey shows loan arrangement fees have more than doubled since 2007, and the banks' margins on loans have hit record highs. This goes some way to stem the losses caused by years of reckless lending.
Bank sales of impaired assets have begun, but have been restricted to prime assets or large management-intensive portfolios. Nevertheless, huge amounts of private equity has been amassed on the sidelines, and looks set to fund the next development cycle.
In the past week, three of the major real-estate investment trusts (Reits) have announced a wholesale return to central London development; in two JVs with Starwood Capital and Brookfield, plus and are both close to agreeing JVs to develop their "Cheesegrater" and "Walkie Talkie" City towers.
