Investors who have purchased properties off-plan may be forced to sell before completion in response to changes in the lending criteria of banks and building societies following the Northern Rock crisis, warns specialist London estate agent Hurford Salvi Carr.

In its half-yearly report, Hurford Salvi Carr which covers the West End, City and Docklands outlines how prior to the 2007 credit crunch, investors accounted for two thirds of new build property buyers across London. However, since the banking crisis, investors have faced difficulties in securing mortgages as loan to ratio values (LTV) have been reduced from 85 per cent to 75 per cent by banks and building societies. Hurford Salvi Carr also warns that some lenders have irresponsibly deserted investors wishing to buy in new developments.

Director of Hurford Salvi Carr, David Salvi, comments: “The credit crunch will have a dramatic effect on the London investment market. Before September 2007, an investor could have relied on an 85 per cent loan to value ratio on a typical ,000 apartment in the City and Docklands. An investor would have been putting in 000 equity and securing a loan of ,000. However, by the end of 2007, banks and building societies were looking for a deposit of ,000 before being willing to consider lending ,000. This has also had a significant impact on bulk purchasers whose equity provision on for example, a 20 unit block might increase by the order of illion.

“This means that some investors who purchased off-plan apartments in 2006 and 2007 will find themselves unable to complete contracts at the time of practical completion due to the lack of competitive funding options. During 2008, we expect to see some investors attempting to sell contracts on, prior to completion.

Hurford Salvi Carr highlights in the report how investors buying off-plan face further complications where contracts have been secured by a 5-10 per cent deposit two to three years prior to both construction and completion.

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