There is a growing moral dimension to the credit crunch as it affects the property market, at least in the United Kingdom. Although banks have become the scapegoat for the crisis around the world, there appears to be an underlying sympathy for their tightening of credit regulations.
All banks in the UK have done much the same as Emirates NBD – an increase in borrowers' minimum salary requirements. The result is that, even with residential prices lower than at any time in the past five years, it is much harder for would-be buyers to obtain mortgages. The expectation is that there will be some form of compromise – banks in the UK are forecast to relax their lending restrictions by the end of 2009, although never to return to the heady lending of the period from 2000 to 2007 in particular. There seems widespread acceptance that the banks' lending policies simply went too far in the days when some offered 125 per cent mortgages and allowed those with variable incomes from a variety of sources to self-certify their earning capacity – leaving them highly vulnerable to default should their expected earnings fall short for any reason.
Many developers and realtors benefited from that cavalier era. But if you talk to most of them now, there is an acceptance that such an approach was wrong; it inevitably led to human misery of people crippled by debt and assets that have been over-valued. We all want the recession to be short-lived, but what happens afterwards – the 'normal' that we all want to get back to – is likely to be a much more muted affair. The public, it seems, will welcome that.