Karis Capital found that lending from UK-regulated banks to small and medium-sized property investment businesses fell from £216bn in March 2021 to £186bn by March 2026.
Bank lending to smaller property investors has fallen by 14% over the past five years, as larger property businesses continue to attract a greater share of available funding, according to research from Karis Capital.
The specialist real estate debt and insurance advisory firm found that lending from UK-regulated banks to small and medium-sized property investment businesses fell from £216bn in March 2021 to £186bn by March 2026.
In contrast, lending to larger property investment businesses increased by 20% over the same period to £375bn.
Karis Capital said the shift reflects the way many banks assess risk, with smaller property investors often finding it harder to access funding through traditional lenders, including high street, challenger and boutique banks.
The firm said the decline in lending comes at a time when falling property values have created opportunities for investors. Property prices fell by 20.2% in the City of London during the year to 31st March 2026, while Westminster saw prices decline by 11.3% and Kensington and Chelsea by 7.5%.
Nicholas Christofi (pictured), 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.”
“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 they see that as a more efficient way of deploying their capital.”
The research pointed to continued growth in alternative lending markets, with the value of outstanding bridging loans rising by 30% to £13.4bn in 2025, while the specialist mortgage market is forecast to grow from £32bn in 2023 to £54bn by 2029.
Christofi added: “The boom in the UK bridging market and specialist mortgage market shows that alternative funding providers are willing to step in for smaller investors.
“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.”