European banking regulations mean London property developers cannot obtain the capital they need to carry out construction projects.
The rules, known as Base II, stipulate that banks cannot lend money to developers unless their offices are contracted to be tenanted, according to Reuters.
“At the moment Basel II is saying that at 0 per cent prelet you can do nothing, at 50-60 per cent prelet you can do something but what it hasn’t worked out is how to deal with the bit in between,” said co-head of the UK division at Commerzbank unit Eurohypo, Max Sinclair.
Some bankers have become tired of being blamed for the reduction in development loans.
Managing director of Westdeutsche ImmobilienBank AG Peter Denton said: “I am a bit peeved that bankers are now seen as really boring, unimaginative or that we’re not willing to take risks. The fact is we have to deal with a number of factors that frankly real estate people don’t appreciate”.
He added: “As an individual, the rationale for investment in London is of course compelling … but we’re not here to buy into the equity story”.
“People’s knowledge of Basel II or Pfandbriefe or credit processes are woeful within the property industry … there is usually a rational argument as to why we will or won’t do something,” said Denton.