Surveyors are stifling property market recovery

Published 10th Jun 2009

By undervaluing properties, surveyors could be prolonging the house price downturn

Surveyors have been accused of undervaluing properties and stifling the property market recovery, according to a new analysis.

Research by the commercial law firm, McGrigors, suggests surveyors are valuing properties up to 20 per cent less than an agreed sales price. It means many buyers need to find a bigger deposit or see their purchase fall through.

The practice is also providing ammunition for gazunders - buyers who reduce their offers on properties, often at the last minute as contracts are due to be exchanged.

The news follows a gradual slowdown in the pace of house price falls. Last week Halifax said that house prices had risen by 2.6 per cent in May. Buyer inquiries at estate agencies rose for the seventh consecutive month in May , its fastest pace in a decade.

However, McGrigors says a more rapid recovery is being undermined. Suzanne Gill, Partner at McGrigors, said: “Surveyors are making some very defensive valuations which are significantly below prices which have been agreed between seller and buyer. This is making it much more difficult for sales to complete and holding back house price growth.”

If a price of £120,000 has been agreed for a flat, a buyer seeking an 80 per cent mortgage (i.e, requiring a 20 per cent deposit) should be able to borrow £96,000. However, if a surveyor values the property at £100,000, the buyer will only be able to borrow £80,000. The buyer will then need a deposit of £40,000 instead of £24,000.

Gill adds: “With builders margins already wafer thin, defensive valuations are piling more misery onto the sector at a time when many were hoping they had seen the bottom of the market.”

McGrigors says surveyors are permitted a margin of error in their valuations of up to 20 per cent. Valuations which are deemed to be more than 20 per cent inaccurate could form the basis for legal action by the lender.

Source: ' Times '

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