Irish banks, who used to lend on all sectors, are not in the market. Building societies, who previously lent, do not exist anymore and there are others who have chosen to exit the market altogether.
Against this there have been some new entrant banks into the real estate lending market - including those from overseas and some existing banks who have expanded their operations into real estate - but these have been more than offset by the leavers and some of the interest has been temporary.
So what is the future?
A vibrant property market needs a vibrant property debt market, which will fund all sectors and development at all levels.
Clearly this can get out of hand when no risk allocation is applied but currently it remains just about impossible to secure funding on certain types of assets and certain development projects. A lot of the debate hangs around the cost of capital and slotting of capital risk and such other terms which, to the uninitiated, might seem slightly strange.
The essence of all these terms is that it is more costly to UK clearing banks and other bank regulated organisations to advance loans to the real estate sector than to other business areas. It is this factor, along with the prior experience of a runaway market, which is driving a lot of bank lending decisions.
Where does this leave property lending?
For some, if I am cynical, it will simply mean being rebadged from a real estate relationship team to e.g. a specialist leisure or healthcare team - as the requirements on real estate lending apply differently to trading businesses.
However, for others, it will be a matter of sourcing funds in new ways. There is an increasing trend within the UK to Private Equity entering the lending market as well as insurance companies. So far this has been largely in the form of buying up discounted debt or lending on large scale investment projects generating products in the prime property sector, but I suspect this may widen over time.
We have seen lending funds emerge open to retail clients as well as funds created to buy distressed debt. The attraction to these investors in the form of Private Equity is that they get exposure to the property market in a more secure manner, by being the lender rather than owner, but can still seek to get the kind of returns that property generates.
In a low inflation economy, property returns will remain attractive to investors as part of a portfolio. The attraction to the borrower is a source of funds which is more akin to general investors, with a known rate of return in many cases rather than fluctuating rates or other variables. This form of lending is common in other jurisdictions and is beginning to become common in the UK with now over 10% of UK real estate debt held by "non" bank organisations. It may change the way we view real estate finance and who are the main players.
Changes in source of funds is not something new. For those with a memory long enough, in the early 1990s it was the emergence of the "Scottish" banks and their appetite to lend to real estate which started the long period of growth.