INTM579070 - Thin capitalisation: lending against asset values: Property companies and the credit crisis

Property played a major part in the crisis which started to affect the world’s economies in 2008-2009. Many of the large banks had large property-related debts on their books. This has and will continue to affect the property market greatly, especially as many of these debts have been or will need to be replaced in the next few years.

As a consequence of the changing financial environment, property values have dropped considerably. It is perhaps fair to say that many in the industry appreciated that values had got too high and that some form of correction had been expected, as has happened a number of times over the last 40-50 years.

It is difficult to predict where the market will go next. Interest rates such as LIBOR are low (though risk margins are high) and more realistic valuations are likely to provide investors with a relatively secure but attractive return.