The value of lending from UK-regulated banks to small and medium-sized property investment businesses has fallen by 14% over the past five years to £186bn, according to research from Karis Capital.

The firm said buyers may need to look beyond traditional lenders to take advantage of falling property prices.

In contrast, lending to larger property investment businesses rose 20% over the same period to £375bn, which Karis Capital said pointed to a shift in bank lending away from smaller investors.

The specialist real estate debt and insurance advisory firm, said the trend is being driven by lending models that typically classify smaller property investors as higher risk, a pattern it said is seen across high street, challenger and boutique banks.

The findings come as property prices have fallen sharply in some areas. In the year to 31 March 2026, average prices dropped 20.2% in the City of London, 11.3% in Westminster and 7.5% in Kensington and Chelsea, according to the Office for National Statistics.

Over the same period, Karis Capital said banks have also focused more heavily on large corporate lending and merger and acquisition activity, often alongside private equity firms.

LOOK TO SPECIALISTS

Nicholas Christofi, chief executive of Karis Capital, said: “Smaller property investors should look beyond banks to take advantage of falling property prices.

“The market is currently offering very attractive buying opportunities but many smaller property investors are finding their usual lenders are less willing to lend.”

He said investors should also consider specialist lenders, bridging lenders and family offices, which can often offer smaller loans and more bespoke funding structures.

Christofi added: “Non-bank lenders are often happier to lend in smaller lot sizes and are much more open to bespoke finance deals.

“Our view is that if you want to get the most competitive finance then you need to look at all the lenders and not just the bigger banks.

“Many banks prioritise larger lending deals and see that as a more efficient way of deploying their capital.”

The report also highlights growth in the bridging sector. Figures from the Bridging & Development Lenders Association (BDLA) which show outstanding bridging loans in the UK rose 30% in 2025 to £13.4bn, up from £10.3bn a year earlier.

While the specialist mortgage market is forecast to grow from £32bn in 2023 to £54bn by 2029, according to research from Together.

Christofi said: “The boom in the UK bridging market and specialist mortgage market shows that alternative funding providers are stepping in for smaller investors.”

He added that reports of buy-to-let landlords selling properties at reduced prices following the introduction of the Renters’ Rights Act had created opportunities for investors able to secure funding.

“Specific events in the property market mean a significant number of property assets are currently being sold at reduced prices.

“That window of opportunity is unlikely to remain open indefinitely,” he said.