Mortgage lenders have warned that downvaluations are now affecting as many as 1 in 30 transactions in a sign that the housing market may be beginning to slow down.
The claim comes from Chris Sykes, director of Private Finance. Sykes suggested that the reason for the rise in downvaluations is caused by the changeable property valuation data and the time taken to record a transaction with the Land Registry. He said:
“Probably about one in 30 loans are affected.
The market is so busy and a lot of people are paying over the asking price, plus the sold price takes so long to make its way on to Land Registry records.
It can sometimes be nine months since an offer was agreed, so the valuers don’t have the data to go on. They tend to want to use sold data rather than what the estate agent selling the property says. It is also based on their opinions of the market.”
This comes after claims were made in April that the number of transactions being delayed due to downvaluations is on the rise and has tripled in some areas, with Adam Kingswood of Kingswood Residential Investment Management suggesting that the share of sales experiencing downvaluation has increased from 5% to 15% since the start of the pandemic.
Similarly, research from HBB Solutions recently suggested that nearly half of property purchases made during the pandemic would have now been downvalued.
Chris Hodgkinson, managing director of HBB Solutions, said:
“Downvaluations can be an extremely frustrating part of buying or selling a property, especially when both buyer and seller have agreed on a price they are both happy with, only for the sale to be scuppered by a third party opinion.
Of course, in many cases these reductions are justified, but in a market running as hot as we’ve seen during the pandemic, it’s not unheard of for lenders to influence this decision due to their own fears around escalating market values.
Unfortunately, there’s not a great deal that can be done to immediately remedy the issue other than the buyer coughing up or the seller reducing the asking price. It’s hardly surprising that many sales, and the wider chains they sit within, can be jeopardised due to a down valuation.”
