Property Receivership in 2023: Why ‘lender beware’ applies equally to residential and commercial properties


Daniel Richardson - Partner CG&Co

The headlines in the business pages do not currently make comfortable reading.

For example, Halifax announced last month that house prices had suffered their steepest annual decline in 12 years.

Prices slumped by 2.6pc in the year to June, making the average home worth £285,932.

Separately, the latest HM Revenue and Customs figures show that home sales fell by 27% year on year in May.

Indeed, some analysts consider these transactions a more accurate reflection of market health than property prices.

With the arrival of the second half of 2023, all the indications are that the ‘lender beware’ imperative has become greater than ever – and this applies equally across residential as well as commercial properties.

Allow me to explain why this is the case…

Quite apart from the concerning drop in house prices and sales, UK inflation currently remains higher than the Eurozone and the US, despite the Bank of England (BoE) being the first major central bank to start increasing rates back in December 2021.

Nonetheless, many were surprised when interest rates were hiked by 0.5% to 5% in June – propelling them to their highest level since 2008 – given the fact that the BoE’s Governor, Andrew Bailey, had said at the start of May that they could be nearing their peak.

Threadneedle Street has consistently underestimated the stubbornness of price rises, since initially predicting that the crisis would be transitory in 2020.

It was also noteworthy when the Chancellor of the Exchequer, Jeremy Hunt, said in an interview at the end of May that he was comfortable with further interest rate rises – even if they push the UK into a recession – as “inflation is a source of instability”.

While it’s impossible to predict what the BoE will do next, few of us will be surprised if – as predicted – the BoE increases interest rates by 0.25% in early August.

When it comes to the commercial property market, it has been widely reported that UK commercial property values fell dramatically in the second half of last year, down by 18% on average and by 26% for UK industrial units.

This is perhaps unsurprising in view of wholesale changes following the pandemic, not least the ‘work from home’ phenomenon, which now seems to be abating.

Some analysts are asserting that the majority of the price adjustment within the commercial property sector is behind us.

This remains to be seen.

I’m stating the obvious when I say that during these uncertain and volatile times, those lenders who can deliver capital when borrowers need it most will be the ones who continue flourishing.

It remains imperative that lenders can use their own funds to relend at rates that are most advantageous to them.

To achieve, this they must ensure that default loans are identified and acted upon at the earliest opportunity to ensure that their capital is returned to them as quickly as possible.

There will continue to be opportunities for appropriate deals on viable assets.

But it’s essential that lenders consistently work with the most proactive, specialist property receivers to maximise their competitive advantage throughout this difficult chapter.