Bankers deliberately avoided property valuations over the past year because the drop in values was so large that they would have had to bring a deluge of cases before the banks' audit committees.

Four senior industry sources have confirmed that bankers would stop short of formal valuations when they discovered how much values had dropped.

An experienced property source said the bankers had been "buying time". The source also said some potential deals are not being concluded as "the banks don't want to crystallise their losses", particularly where private clients invested money as part of a deal. "They're willing to sit it out as long as possible," the source said.

"The auditor cannot sign off the accounts unless valuations are accurate. Even if they're January 2007 valuations they're now historical," pointed out another director. "There'll have to be a serious write-down, there's no two ways around it. It's the elephant in the room. When the auditors go in, all hell is going to break loose. I think there will be carnage."

Another senior source said the liquidity injected into the system "will crystallise the real value" of property and that, up to now, the banks simply used the last open-market valuation, even if they knew it was no longer correct. He believes banks will now push developers to sell because they can create new business elsewhere.

An industry heavyweight said the banks will now have to address their property lending issues. "They will have to request formal valuations now. They can't continue to roll up interest on an asset that's declining in value," he said.

The sources also said they expect banks to be more willing to foreclose on developers from now on.