Property Prices Are Increasing But Valuations are Going Down

Posted by Vesta Property on 27th October 2020 -

"UK house prices rise at fastest rate since 2016, says Nationwide" and "Will house prices crash? Plunging valuations fuel fears". These are two headlines from The Guardian and The Times less than a month apart.

Whilst it is not unusual for these two publications to take a different stance on the political and economic outlook, in this instance both headlines strangely reflect what is happening in the market.

As a marketplace, here at Vesta, we are increasingly seeing multiple offers for the best properties, often at or above asking prices due to increased investor competition.

However, those investors that are not cash buyers and who require financing are now at a significant disadvantage as valuers are subsequently down valuing the same property. Even when there are multiple buyers with higher competing offers!

In some instances, we have seen valuers come in and produce valuations at 10%, 15% and even 20% below those competing offers. We have even seen the same valuer decide to reduce the value of a property by 15% after providing a higher valuation just over six months ago.

It does seem ludicrous because in reality the value of a property is really what someone is willing to pay for it and if you have multiple parties willing to pay 10%, 15% and 20% above the valuer's valuation something is clearly amiss.

There are many theories for the cause of this strange phenomena, but it simply comes down to banks' reduced willingness to lend in an environment where near negative interest rates mean tighter margins compounded by the fear of an increase in bad debts due to the economic downturn and as government support unwinds. However, a downturn in the housing market in the way that was predicted by many at the start of the COVID-19 pandemic has yet to materialise, and in fact the opposite has occurred, with prices continuing to rise.

As we have said in previous newsletters - the home has become much more important to us than ever before as it is now shelter, office, gym and sanctuary. With this in mind, and based on investor demand, we don't currently see any decline in the perceived value from investors.

Our aim is to continue to support landlords to sell with tenants in place, and for those who are buying through Vesta we will work closely and safely with all parties to help move along the sale as quickly as possible and in line with government guidance.

We have also partnered with leading mortgage broker Coreco, who can support buyers requiring mortgages for buy-to-lets, HMOs and portfolios and to make sure that buyers can provide the necessary comfort to vendors that their offer is executable. We are also keeping all our vendors updated on the stance taken by banks and valuers so that they are prepared for fluctuations in valuations.

You can browse our marketplace to see what is available today - new properties are added daily!