Mortgage brokers and advisers are seeing increasing numbers of down valuations when surveyors issue valuation reports on properties for mortgage applications.
Emoov, one of the UK’s largest online estate agents has suggested that 1 in 5 properties are currently being down valued, where the usual figure is around 1 in 20.
Clearly, this will reflect demand in geographical areas. For example, there has been a notable slowdown in property activity in London and the South East whereas other areas in the North and the Midlands are still growing. Cyclically, London leads the country entering positive and negative growth curves usually a year before the rest of the country and this still appears to be the case.
In addition, the average time it takes to sell a property is increasing from the usual 6 weeks to around 12 weeks in many areas.
Having seen many property cycles over the years, we suggest that if you are seeking a property, be realistic about what you offer, it sometimes pays to make a ‘cheeky’ offer. If you are selling, be prepared to negotiate. If you have recently bought, then expect your property value to fall. It could even mean negative equity. If you already have or are expecting negative equity then you may wish to ‘bide your time’ and make home improvements to try and boost value. You may wish to consider making overpayments on your mortgage to boost equity. If you have a ‘help to buy’ equity loan, is now the time to save hard and get ready to a back some or all if the equity loan whilst your property valuation is lower. For example, if you bought a new flat for £100,000 with a 5% deposit and a 20% Help to Buy loan i.e. £5,000 of your own money and £20,000 of Help to Buy Equity loan, if your flat then has a period of lower value e.g. £90,000, the proportionate value of your Help to Buy equity loan outstanding is £18,000 i.e. it is lower and this is the time to pay back some or all of the equity loan to own an even larger proportion of your loan.