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Pandemic price surge: 60 per cent of London homes on the market last year were ‘down-valued’ by lenders

 (Shutterstock / GagliardiImages)
(Shutterstock / GagliardiImages)

The noise surrounding the pandemic property boom in London and the South East caused the dramatic inflation of asking prices, according to research published today.

Sellers over-priced their homes as they tried to cash in on buyers looking for more space following the first of the national lockdowns, only to then have their properties re-priced downwards during the mortgage process.

New estimations by agent Benham and Reeves reveals that in London 59 per cent of properties on the market were “down-valued” by surveyors – the highest level across England. 44 per cent were re-valued at a lower price in the South East, which is in line with the national average, not including Wales.

This means that of the 80,965 properties that were sold over the last 12 months in the capital, a whopping 47,769 of them had their agreed price slashed — even though they were already under offer.

A down valuation occurs when a surveyor, acting on behalf of a lender, assesses a property and believes it to be worth significantly less than the price agreed by the seller and buyer.

This can affect the amount the lender is willing to offer and may even result in the sale falling through.

The Covid-19 pandemic and lockdowns triggered a mini-housing market boom as home buyers looked to upsize out of the confines of urban areas. Demand from first-time buyers fed into the furore too, desperate to escape working-from-home in a cramped flat share. This drove prices up which caused inflated asking prices.

The South East recorded the largest number of sales for this period due to the wave of families moving out of London and into the home counties. Of the 137,107 transactions 60,327 were down-valued by surveyors as part of the mortgage process. This equates to 44 which is line with the national average, not including Wales.

“Down valuations can be a real thorn in the side of those eager to progress with a property transaction but unfortunately they are common in the UK property market,” says Marc von Grundherr of Benham and Reeves. “They occur due to over expectant sellers setting their asking prices too high but we’re also seeing more lenders request a greater degree of caution by values in a market where prices are climbing at a rate of knots,” he warns.

On average, re-valuations took agreed prices in London down 1.5 per cent from £510,299 to £502,799 and cost hopeful vendors in London £7,500. In the South East accepted offers reduced on average from £355,948 to £348,448 (-2.1 per cent), while across the country values moved from £265,608 to £258,168 (-2.6 per cent).

There are three options for the seller, according to von Grundherr.

“As a seller, you can look for a new buyer purchasing through a different lender and hope they agree on the value of your home. Or you can hold tight until values increase at the risk of losing your buyer. Alternatively you can simply accept the lower value placed on your home,” he explains.

However, it is an additional pressure in an already fragile process in a period where lenders has been particularly strict.

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