Solvency II will encourage European insurance companies to lend against property, delegates at the IPD/IPF Property Investment Conference were told last week.
Speaking at the annual conference in Brighton, Peter Denton, managing director at Westimmo said: 'Lending on property will, for the first time, become interesting for insurance companies. I spoke to a European insurance company this morning and they have just had a board decision to commit EUR 2.5 bn in new lending to property next year. We will see an increasing number of insurance companies following suit in the provision of debt.'
Denton said he also expects CMBS to return 'in some form' because 'without access to the capital markets we don't stand a chance'.
The scale of insurance company lending, however, is dwarfed by that of the wall of refinancing which faces the market. Denton shared the stage with HSBC's head of Real Estate Andy Armstrong who put the deleveraging of UK property debt into context.
Armstrong told delegates: 'In 1999, the UK property debt market was £42 bn - today it’s around £280 bn: 60% of that debt sits in the two nationalised banks and NAMA. Each one has confirmed they wish to reduce their exposure to UK property financing - quite how they do that I haven’t worked out.'
The UK’s nationalised banks, he said, are aiming to reduce their property loan books by £30 to £40bn each, while NAMA is unwinding a £27bn UK property loan book.
Armstrong calculated that the value of property which needs refinancing and the debt raised against it is around £90 to £100 bn. 'That’s a lot of money to write off,' he said.
Denton added: 'The major providers of debt over the last couple of years are not likely to be the driving force going forwards.'