London Cash Buyers Send Banks North To Riskier Loans

London’s junior market grows for first time since 2007

U.K. lenders are already targeting the weakest housing markets with riskier loans because the London market is dominated by cash buyers. About 35 percent of homes bought in the U.K. this year were paid for entirely with cash, according to data compiled by broker Savills Plc. (SVS) In London, its as many as 60 percent, with demand driven by purchasers from abroad who view the city as a haven, according to Richard Sexton, a director at e.surv, a unit of LSL Property Services Plc. (LSL) Different Country The London market is like a different country almost, Sexton said. Thats a lot of foreign cash coming in. Gareth Hill, a spokesman for the Council of Mortgage Lenders , a trade association, declined to comment. Spokesmen for RBS, Lloyds and the U.K. Treasury didnt reply to calls and e-mails seeking comment. For the rest of the country, national price gains have been fueled by the Funding for Lending program that allows banks and building societies to borrow from the Bank of England at low rates if they use the cash to fund residential mortgages. That helped boost U.K.

Accountancy group UHY Hacker Young said 20 companies floated on the London Stock Exchange’s Alternative Investment Market (AIM) in the three months to Sept. 30, while 16 delisted. This was the first time more had joined than left since the third quarter of 2007. “More companies are again looking at an AIM initial public offering as an opportunity for growth,” said Laurence Sacker, Partner at UHY Hacker Young. AIM’s attractiveness to UK retail investors has been boosted by the government’s decision earlier this year to allow AIM stocks to be included in individual savings accounts (ISAs) – popular tax-free products – for the first time. The research showed 56 companies joined AIM in the 12 months to the end of September, raising a total of 881 million pounds ($1.42 billion) – up 70 percent on the previous 12 months. The overall value of companies listed on the AIM market was 67.7 billion pounds as of August, according to data from the LSE, down from a peak of 97.6 billion pounds in 2007. Stronger equity markets have helped revive new listings in Europe after years of subdued activity due to the financial crisis, with London one of the busiest destinations. Separate data from Ernst & Young over the weekend showed that, when the LSE’s main market is also included, more than 3 billion pounds has been raised from London listings so far this year, double the amount raised in the whole of 2012. Sacker said next year also looked busy for AIM, but the market is still a way off returning to previous levels – in the 12 months to Sept. 30 2007, 8.8 billion pounds was raised by AIM IPOs. “The deal pipeline is looking healthy. 2014 could turn out to be a real bounce-back year for AIM, although getting back to the level of new listings we saw during the boom years remains a pretty remote prospect,” he said.