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* Regulation needs to be fit for entire cycle - report
* Proposes changes to loan valuation model
* Seeks creation of property loan database
LONDON, Oct 22 (Reuters) - Lenders to Britain's property sector must change the way they value real estate to avoid a repeat of the meltdown that helped to cause the financial crisis, a report by banking and property experts said on Tuesday.
The report by the Real Estate Finance Group (REFG), comprising senior bank and property figures from companies including Wells Fargo, CBRE Group and Grosvenor , says that reform is needed to curb overenthusiastic lending at the top of the cycle and ensure that banks have sufficient cash reserves to support post-crash recovery.
The REFG was set up to propose a market structure and regulatory regime to guard against the practices that left many banks with portfolios of property loans that exceed the value of the underlying real estate.
After years of excessive lending in the run up to 2008, banks such as Royal Bank of Scotland and Lloyds have been hit by tough capital requirements that have forced a drastic reduction in their lending to the sector.
"We need 'right touch' regulation fit for all stages of the cycle, rather than 'light touch' as the market rises followed by 'heavy handed' after a crash," said Grosvenor Finance Director Nick Scarles, who chairs the group.
The REFG's seven proposed reforms include a requirement for loans to be linked to a property's long-term loan-to-value ratio rather than the ratio at the time of the loan. This would compare the amount of the loan with the average value of the property through the market cycle, ensuring that capital buffers are built in automatically.
It also advocated the creation of a database of all UK commercial property loans, the risk levels of which could be analysed periodically by regulators and academics.
The report also proposed that key staff in lending teams should be required to gain accredited qualifications.
The recommendations will be sent out for comment and a final report will be published in early 2014.