30 July 2016 – by Karl Tomusk
A surge in the cost of debt will hit UK commercial real estate in the second half of 2016, according to new research.
In a market sentiment survey by XploreMarkets and Park Street Advisors, 84% of UK property investors, lenders and advisers said they expected senior debt to become more expensive, with a third predicting a rise of 25-50 bps in H2 for prime property.
An even steeper hike was expected for secondary assets, where 93% of the 227 respondents said there would be a rise in the cost of senior debt following the Brexit vote. Nearly a quarter expected the rise to be 50-75 bps.
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Pradeep Pattem, chief investment officer at Park Street, said: “These Brexit-like events show that liquidity vanishes at the worst times, so people will avoid secondary and high-risk product.”
With less confidence, 64% predicted that private equity holders with NPL pools would slow their disposals.