Bursting the House Price Bubble

Panorama: Bursting the House Price Bubble, Monday 4 February 2008 at 8.30pm on BBC One

The plan was that rent of around �1,200 a month from some of Nottingham's 100,000 students would pay her mortgage.

But the plan failed and the flat was eventually repossessed and sold on to its current owner for �74,900

Maria's dream of becoming a property millionaire was sold to her by Morris Properties.

In their sales pitch the company offered to look after the property, the tenants and rents - so all armchair investors like Maria had to do was sit back and relax.

It's become a nightmare. Obviously I've lost everything that I've ever worked for in my life. Maria

The Land Registry keeps a record of the price paid for each property sold in England and Wales. Their record shows Maria paid just under �200,000 for the flat - but she didn't. She paid just under �170,000 - a difference of 15%.

The Land Registry expects the figure it gets from the buyer's solicitor to be the price paid for a house at completion. But the figure with the Land Registry makes it look as though Maria's flat sold for �29,000 more than it really did.

Land Registry

It's important for the Land Registry to have an accurate record for the actual price paid in all property sales. That's because they're used by valuers to compare future sales on other similar properties in the same area.

The Land Registry record should show the actual price paid for a property after incentives and gifted deposits

Maria told Panorama: "It's become a nightmare. Obviously I've lost everything that I've ever worked for in my life. I now run the risk of losing my own home, so potentially in 2008, I could be homeless."

Morris Properties - which recently changed its name to Intellectual Property - denies Maria's flat was over priced when sold to her and says valuations are carried out independently.

It says Maria's flat and those used to value it were in a part of Nottingham "later referred to as the 'gun capital' of the country. As a result, students were advised not to rent in this area".

A Serious Fraud Office investigation into the activities of Morris Properties is continuing.

Gifted Deposits

Gifted deposits - like that offered to Maria - are widely used throughout the building industry. It's the buyer's solicitor who is obliged to inform the mortgage lender about any such incentives or discounts given to buyers.

It's also their duty to report the actual price paid for a property to the Land Registry. Panorama found the forms the solicitors have to send on are often completed by the developers and give the higher valuation - before incentives are deducted.

The Solicitors Regulation Authority told Panorama it is currently investigating 60 firms of solicitors across the country over allegations of over-valuing and mortgage fraud.

Mortgage Lenders

It is vital mortgage lenders know about any incentives like gifted deposits when deciding just how much to loan on a property.

Michael Coogan of the Council or Mortgage Lenders told Panorama: "All lenders are going to want to make sure they lend the correct amount based on the correct valuation.

"And if they don't know about a deposit that has been given...by a developer to a customer they may simply lend too much money.

"They may wish to only lend 75% say and they end up lending near a 100% of the value because they haven't appreciated what's been going on in relation to the developer and the customer."

Panorama: Bursting the House Price Bubble, Monday 4 February 2008 at 8.30pm on BBC One

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