German finance funding UK commercial property recovery

It has been revealed that the UK commercial property sector recovery is predominantly being financed by German banks who are now offering up to 60% of the required capital for the sector. The number of German banks looking to arrange large long-term loans to the UK commercial property sector has increased from 18 to 21 during the past six months and indeed it seems that the German financial companies have taken a more long-term approach to the UK sector than their UK counterparts.

Whether this is indicative of liquidity issues within the UK market or in fact the German banks have spotted something of a potential investment gold mine in the longer term remains to be seen but UK based liquidity is still very much at lower levels. This begs the question as to where we would be without overseas finance for the UK property sector and indeed what UK taxpayers are actually receiving for their significant investments into the UK banking sector and the UK money market.

It will be interesting to see whether UK banks react to the ever-growing dominance of overseas capital within the UK commercial property sector because it is very risky to overly depend on overseas finance. At a time when many UK business sectors are crying out for additional capital the UK banking sector does not appear to be in a position as yet to provide this.