NAEA mistake: It’s Estate Agents over valuing property
Surveyors are not undervaluing property as the NAEA claims – but instead, estate agents are over-valuing property.
The National Association of Estate Agents today claimed that surveyors are purposefully under-valuing properties, thus adversely impacting the property market.
This is especially when someone applies for a mortgage, only to find the mortgage lender will only lend a smaller amount, leaving the buyer in difficulties in either securely the mortgage, or retaining best terms.
However, the NAEA claims, widely reported, can only be regarded as facetious.
Closely observing the property market in Scotland over the past two years, it is very apparent that despite falling sales, Scottish estate agents have trying to raise asking prices on properties where they can.
If this underlines the NAEA’s complaint, then it becomes very apparent that surveyors are not undervaluing property – but, instead, estate agents are over valuing property.
It must be remembered that many estate agencies gain more money the higher the sale price, due to charging according to a percentage of value, rather than fixed fees.
Surveyors, on the other hand, have no financial incentive to try and fix the value of a property in the same way.
So the NAEA’s claims really need to be taken with a pinch of salt – it hardly seems convincing that an industry who has a self-serving interest to inflate prices, should therefore be able to complain that in an environment where property prices have fallen, that surveyor valuations have additionally fallen.
Perhaps the announcement by the NAEA was nothing more than a bit of posturing, and a desperate one at that.
In the meantime, despite the Spring and Summer period being traditionally the peak season for property sales, the Nationwide has only been able to report a small increase in property prices.
Therefore as we approach the Winter, don’t be surprised if we see property prices begin to fall more steeply as even this season’s weak interest falls back.
It’s worth remembering that even conservative organisations such as ratings agencies and even the FSA are presuming an overall fall from peak to trough of between 30%-40%, with rating and Basel II compliance being based on these projections.
With property prices now being claimed to have fallen only between 15%-17% so far, there is plenty more heartache in store for the UK property market.
Sales are flat in the areas I’m watching, and I’m incredulous to see that even under such conditions, estate agents and property solicitors are trying to inflate prices as if there’s a boom going on.
Additionally, we have a wave of fixed rate mortgages completing this autumn, which will result in a lot of home owners suddenly having increased difficulty in remortgaging, or else being left on mortgage deals with punishing rates. None of which can be imagined to be good for the property market.
In which case, the NAEA would better serve its members by trying to encourage more realistic valuations to promote larger sales volume, instead of the current practice of trying to charge more on a lower volume of properties.