An overwhelming majority (86%) of property professionals expect default levels on commercial property to increase over the next 12 months, according to new research commissioned by Investec Private Bank's Structured Property Finance division ('Investec'). Of these, nearly a third (31%) believe that they will increase significantly, while the remaining two thirds (69%) believe the rise will be marginal.
Despite rising defaults, 83% of respondents are optimistic that banks will continue to lend to property investors and developers, albeit on a restricted basis. A further 12% believe that banks will continue to finance transactions with only a marginal tightening of their lending criteria. Just 4% think that banks will for the most part stop lending altogether.
Paul Stevens, Investec, commented: "This reflects our view that while we are undeniably operating in tougher market conditions today, we're optimistic that strong lending opportunities remain. We are continuing to work on a number of highly promising deals with both new and existing clients. The key to obtaining finance in the current environment is to have a successful track record and the ability to add value."
When questioned on whether they thought that the UK economy will move into a recession over the course of the next year, nearly a quarter (23%) of property professionals said it was unlikely, while just under half (44%) remain undecided. Just over a third (36%) believed a recession was either likely or very likely.
When asked to predict where the UK lending base rate would be by the end of 2008, a third of respondents expect a further reduction of 0.50 points to 4.50% and a fifth (21%) forecast it will be 4.75%.