Of course, all of these points are valid in their own right but there are also some underlying factors which appear to exist away from the media microscope. One or the key factors is the new build market. It seems to me that all the plots around my local habitat the borough of Croydon - that have festered for years, have magically hack their planning permission applications accepted in the last 12 months - maybe as a result of Red Ken's quest to provide more homes?
The flats on these sites have flown up, which is a tribute to the builders involved, who have perfected the art of Mcccano construction. The real value of the properties has been the subject of much debate within our industry. This is because of the undisclosed incentives for quick-sale that are often dished out by the builders. These are more prevalent later on in the development as the final plots are rapidly offloaded at a lower price so that a N H BC certificate can be granted releasing the builder to concentrate on his next project.
Cash flow is the key and the modern phenomenon of property clubs - a conglomerate of investors who know exactly how to tap into this weakness. Nevertheless, it accelerates the builders' efficiency and the end result will be more landlords.
Some lenders seemingly cottoned on to this activity late in the day as they got hurt with inferior collateral to support their loans. Let's not forget a shiny new house is like a shiny new car- its depreciation in value is initially sharp. Also a few of the lenders who operated multiple brands caught colds through overexposure to specific sites as there appeared to be no central accounting of loans, which consequently compounded their misery.
To further compound the valuation assessment problem, not all of the valuers are totally independent, including those with national chains. Why? Well, sometimes the surveyors are intertwined with the estate agency division that was tasked with selling the properties.
The closing of ranks appeared to be inevitable, with noises being made by lenders in many quarters that they would pullout of the market or restrict their exposure to houses or very low loan-to-values (LTV). The builders and landlords are nimble though and incentives when quickly moved from a deposit to post-completion incentives either by way of cash back or white goods These are notoriously difficult for the valuer to spot and are likely to be detected only by chance because understandably it's not in the builders or landlords interest to let the truth be known.
Another solution to keep the builders and landlords growing was bridging finance. This works off the open market value rather than the purchase price - thus eliminating any question over whether the deposit was paid by the builder. The bridging finance was then rermortgaged by the landlord into a mortgage - remortgages of course working on valuation.
The net effect to the lenders was identical ~ loans against properties without a handle on their true' worth. To protect themselves, many imposed a restriction preventing remortgages from taking place immediately after purchase, typical; a buffer of at least six months.
