Down valuations increase as housing market slows
Recent reports in the press suggest that professionals involved in valuing property are becoming more cautious in their valuations.
The trend is related to fears that the UK could experience difficulties similar to those in the US, where the growth in sub-prime mortgage lending led to a crisis in the money markets.
This crisis, combined with rising interest rates, has left UK lenders mindful of protecting themselves against lower house price inflation, and the possibility that UK house prices might even fall.
As a result, the number of down valuations, which rarely occur when the housing market is buoyant, may increase substantially.
A surveyor will down value a property when he or she decides that the property value for mortgage purposes is less than the agreed purchase price.
John Charcol, the independent mortgage broker, has seen an increase in the incidence of down valuations over recent weeks, as the housing market has slowed down.
The broker has confirmed that the majority of down valuations have been between 5% and 10%.
At the same time The Royal Institution of Chartered Surveyors has pointed out that a surveyor’s job is to look at the housing market as a whole, and not just a particular property.
Meanwhile, the property website Rightmove.com reported that house prices increased by 0.6% from July to August, with London asking prices falling for the first time in a year, albeit by only 0.1%.