Property down valuations wipe millions off stagnant housing market

Property experts are warning of a surge in down valuations – with thousands and in some cases more than £1 million pounds wiped off a property’s value – as surveyors adopt caution amid stagnant house prices.

One landlord said the mortgage valuation process has passed from a “professional service into a game of Russian roulette”.

Adam Stiles, managing director at London-based mortgage broker Helix Financial Partners, said he has had three properties downvalued by over £1 million in recent weeks against a backdrop of slowing house prices.

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“We've had some atrocious valuations of late,” he said.

In one example, a freehold house in prime London estimated at £3m was valued at £1.4m – less than half. “This is after previous valuers had agreed with the estimates of the borrower for their existing funding,” said Stiles.

In another case, one valuer went to value two finished new builds and gave a value of £1.7m. Stiles then took the deal to another lender that instructed a different valuer who, two weeks later, valued the properties at £2.8m.

“That's a £1.1m difference in value and it's simply crazy,” Stiles said. “There needs to be more accountability and means for impartial appeal as currently valuers are 'marking their own homework'.”

Jack Tutton, director at Fareham-based broker SJ Mortgages, also said down valuations are becoming more common: “We have seen a higher number than we have experienced for a long while.”

Tutton recently had a surveyor reduce the value of a client's property by 10% versus the value they had placed on it only a matter of months before – from £250,000 in March only to reduce this to £225,000 in June.

“I am not aware of anywhere in the UK where the housing market has reduced by 10% in such a short period of time,” said Tutton.

House prices stagnant

Down valuations can sometimes be caused by people overstating the value of their properties. But surveyors are being accused of being overly cautious with the values they are putting their names to as a result of the stagnant housing market.

The latest house price data from Nationwide shows prices fell by 0.8% in the month of June, the sharpest monthly decline in over two years. Halifax reported zero growth during the month following a 0.3% drop in May.

There is also a glut of supply, with 14% more homes on the market this time in 2024, according to property listing site Zoopla. A market flooded with options for discerning buyers keeps a tight grip on the rate of house price growth.

This is particularly the case in expensive areas – in London and the South East and South West regions of England, the number of homes for sale is 16 to 19% higher than a year ago, according to Zoopla.

Yet the tide could be turning. The latest Halifax house price index for July found house prices rose 0.4% last month – after a pretty flat June and a drop in May. It’s the biggest monthly rise since the start of the year.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “July saw the housing market warm up very slightly, after the end of the stamp duty holiday saw dark clouds move in from April, driving buyers away. Balmier conditions have seen some of them return, and the sun is coming out for sellers in some regions.”

Largely less expensive places – especially Northern Ireland and Scotland – posted particularly robust growth. In the case of Northern Ireland, house prices are up 9.3% in a year.

Meanwhile in England, more affordable regions – including the North West and Yorkshire and the Humber – are growing much faster than pricier parts of the country, like London and the South East.

Areas that have seen stronger growth since the pandemic – like the South West – have slowed significantly.

Is now a good time to sell a house?

There are a few other factors working in favour of sellers looking for the the right time to sell their house – falling mortgage rates, which are expected to go lower still following the Bank of England’s decision to cut interest rates to 4% in August, and increased flexibility as to how much banks can lend as a percentage of salary.

However, there are still some risks to watch, said Coles.

“The weakening of the employment market could dent buyer enthusiasm. Meanwhile, if concerns about potential tax rises in the Budget take hold, it could put people off taking the plunge until they know where they stand,” she said.

“Then there’s affordability to worry about, at a time of sky high prices and mortgage rates well ahead of where they were a few years ago.

“It means there’s no guarantee this fragile price rise will strengthen into more meaningful growth, instead of being snuffed out by pressures within the market.”