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Simulating the cyclically adjusted returns to UK property lending

Richard Barkham (CBRE, London, UK.)
Malcolm Frodsham (Real Estate Strategies, London, UK.)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 2 February 2015




The purpose of this paper is to provide an indication of the returns to commercial property lending over the last 30 years in the UK.


There is no long-term index of the returns to commercial property lending in the UK. This paper provides a partial solution by simulating the performance of bullet loans of various vintages, based on the value movements of the IPD index.


On average over the long-term debt returns are higher than equity returns. However, in certain periods, the losses incurred by real estate lenders are very large.

Research limitations/implications

No account taken of risk mitigation strategies used by lenders such as cross-collateralisation.

Practical implications

Provides an alternative approach to that recommended by the recent IPF “Vision For Real Estate Finance” Document based on the use of ICR. Makes the case for a loan equivalent of the IPD index.

Social implications

Reduced chance of resource misallocation and recession due to excess real estate lending.


Very limited information on private real estate debt returns.



Barkham, R. and Frodsham, M. (2015), "Simulating the cyclically adjusted returns to UK property lending", Journal of Property Investment & Finance, Vol. 33 No. 1, pp. 66-80.



Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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