INTM518070 | Thin capitalisation: practical guidance: 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 affected the property market greatly.

As a consequence of the changing financial environment, property values dropped considerably, but have recovered. This may have led to some investors relaxing LTV covenant expectations for a period, though they would have expected interest cover to be maintained. 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.