Focus on downside risk has receded over the past year. There are signs that the market is rebalancing and the outlook has become more positive.
UK invested stock fell by 3% in 2012 amidst continued deleveraging. This has been led by declines in bank lending in recent years. At the same time non-bank lending has stepped up (Figure 1).
This is changing the composition of the private debt quadrant and reduces the market’s traditional reliance on bank funding. It should help the market’s ability to deal with cyclical swings in future.
Our annual investor and lender survey has started to reflect the more positive macro outlook. Both confirm the continued growth in non-bank lending. Lenders see more progress towards their non-prime workout. Investors also confirm less difficulty obtaining debt. But, sentiment has been relatively slow to improve due to this debt-related workout. But, things are better than feared, considering:
Our analysis confirms that UK transaction activity grew by 6%, following a decline in 2011. Cross-border volumes globally have returned to their 2005 levels and the UK leads the charge on this front.
The UK is classified as one of the most attractive markets in our Fair Value analysis. This is triggered by near-record low gilt yields and limited new supply of space. Many re-priced regional markets offer attractive returns.
The UK market is highly liquid relative to other global markets. With many investors citing a lack of suitable stock as their main concern, liquidity is emerging as an important issue. The UK already ranks very favourably in terms of overall and inter-regional liquidity, but will be further supported by a more stable and diversified lending market.
Source : DTZ (Groupe UGL)