Insurers to provide more finance
European-based insurer Axa has created a €2.5 billion fund which it will put towards the development of new offices, shopping centres and other commercial properties across Europe as it hopes to enter the gap in the property market created by retreating banks and other debt lenders since the financial crash.
The French firm has so far invested in high profile developments including the Kohm Pederson Fox-designed office block Sixty London and the new Coface headquarters in Paris. The move comes as more and more European banks look to cut the amount of money they lend to the property sector as a result of the subprime crisis in 2007 and the ongoing European debt problems.
“We are already beginning to see a strong pipeline of potential investments…. ranging from land or speculative developments through to refurbishments and we expect to see a further increase in such opportunities in 2012,” explained Laurent Vouin head of opportunistic funds at Axa Real Estate.
The move by Axa could see insurance companies regain their position as key sources of finance to the property sector, a role they lost in the 1980s to an aggressive banking sector. The next two decades left banks dangerously overexposed to bad property debt following the collapse of the market in 2007. Since then they have been forced into heavy writedowns on billions of euros worth of non-performing loans and are now more cautious in providing debt to the sector.
However no matter how much movement there is from the insurance industry it is unlikely that it will be able to cover the shortfall in property finance caused by the retrenchment of the banks. According to a recent report by BNP Paribas it is estimated that insurers will only be able to fill a mere 17 percent of the financial hole left by European banks shedding exposure to the sector.
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