Valuers must shield buyers and lenders from risk of housing crash
London and Aberdeen have been singled out as examples of emerging housing bubbles which run the risk of an unexpected and sharp drop in prices when the bubble bursts.
Ian Fergusson, chief surveyor at Sesame Bankhall Valuation Services, said he has seen evidence mounting of a sealed bidding frenzy taking grip throughout London.
He said: “It was this very scenario when, in the months leading up to the housing crash of five years ago, surveyors came under increasing pressure from buyers, sellers and estate agents to match valuations with agreed sales prices.”
But Fergusson warned there can be a significant difference between what the surveyor values the property at and what it actually sells for.
He added: “And that gap is, in certain hotspots, once again being stretched to the limit in some areas just five years or so after a major correction in the housing market saw prices plummet throughout the country.
“This raises the question of whether any of the lessons have been learned from the housing crash.”
Research from valuation service Hometrack revealed that London buyers are sometimes paying more than 99% of asking prices against a backdrop of soaring demand.
As demand outstrips supply buyers are paying the highest proportion of asking prices seen for a decade.
“Spiralling house prices surging ahead of market valuations raises the risk of the market over-heating,” said Fergusson. “Leaving some home buyers to face a mortgage shortfall and a rise in the incidence of ‘down-valuations’, where a lender’s surveyor values a property below the agreed price.”
Fergusson said chartered surveyors undertake considerable risk management and comparable analysis processes to protect buyers and lenders against a widening gap between what they have paid for their house and its valuation.