Debt outstanding to property companies now amounts to 11.5% of all commercial lending, up from 9.9% at the end of 2000 to at the end of last year. The last time lending reached this level was in 1992 when the Bank of England was issuing increasingly strident warnings that such an exposure to property was putting banks at risk.

According to DTZ Research, demand for loan finance has been strong recently for a number of reasons. First, interest rates are low by historic standards. The arbitrage between the cost of borrowing property income yields is encouraging debt driven purchases. Second, as interest rates fell sharply over the past year, borrowers have been seeking to refinance relatively expensive older loans. Third, the growth of indirect vehicles like limited partnerships means institutions have been able to take on gearing for the first time. And fourth, overseas investors in UK property are becoming more highly more highly geared. They have learned that by borrowing in local markets they can reduce their exposure to exchange rate risk.

And DTZ warns that the Bank of England data underrepresents lenders' full exposure to commercial property by as much as a third. It does not count lending by non-UK regulated banks, and banks are increasingly using securitisation techniques to remove property debt from their balance sheets. DTZ estimates the total debt outstanding to commercial property to be £102 billion ($1.45 billion). This is more than 50% higher, in real terms, than at the top of the last lending cycle, but in an entirely different interest rate and property market environment.