News Archive
September 2007
Much has been written over the past few months about the apparent downturn in the property market both in England and Scotland and quoting statistics from one source or another. I can just see the typical headline now “Property market falls by 4.2% in December” or “house prices have fallen by 0.8% in such and such a place”.
Whilst a useful guide these statistics are a guide only and must be treated with a degree of caution. The truth is generally somewhere else although there may well be property transaction which may fit neatly within the range published. In an ideal world the figures should be based on a surveyors informed opinion of the likely market values of a random selection of typical individual categories of house or flat in various areas within towns, cities or the rural area and then valued on a set periodic basis to ascertain how valuation prices have risen or fallen with regard to those types of properties. The valuations would be based on current market evidence at the date of valuation assuming that the property had not changed in any way and that it remained in average condition.
As a generality the percentage figures quoted in the press and by the media will be based on the total price of all of the properties sold within a city, town or area divided by the total number sold. This gives an average and not an accurate figure only. Often these average figures obscure the real facts. It has been my experience over many years that when market conditions improve after a period in the doldrums the prices start to improve at the upper end first before spilling down into the cheaper properties and the figures are therefore based on a relatively small sample number of sales often showing a lower percentage rise overall as the price rises at the lower end of the market lags behind. Conversely as market conditions cool it starts to affect the lower end first with houses and flats in that category proving more difficult to sell. Because of the much greater volumes of starter homes on the market this can often show a much lower rise or even a price fall as more speculative top offers disappear when in actual fact the top end is still rising but the lower end prices are falling or hardening. In addition some areas will always prove more popular amongst purchasers and will tend to show higher percentage increases in buoyant periods and lower percentage falls in a falling market. This is particularly the case with the better areas of established traditionally built housing. These properties are a finite resource and the numbers are fairly static or reducing as sites are cleared and redeveloped particularly for flats and apartments. However with the general improvement in disposable wealth over the past few years the pressure on that sector has increases with more and more potential purchasers chasing the same properties.
An unfortunate side effect of these statistic based percentage figures is the tendency for some home owners to think that their houses are worth more or less than they really are and when selling to either hold out for a higher price or in the absence of any information to sell for a price less than the market value when market conditions clearly dictate otherwise. In addition some lenders may be prepared to lend on the basis of an index linked figure leading to a borrower being over or under geared in relation to loan to value.
With the far greater availability of market evidence from a number of popular web sites many sellers and purchaser have resorted to checking on the sales evidence shown to get some guidance on likely selling price of their houses or purchase price of the house they are interested in. When viewing these sources of information it is important to bear in mind that the information has come via the Land Registry and is already weeks or even months out of date so may well not give a true reflection of property prices at the time the website is viewed.
Finally much has been spoken about the accuracy or otherwise of a property valuation but it must be born in mind that a valuation is a highly subjective matter of opinion and that no two valuers may have the same opinion or view a property in the same way leading sometimes to significant disparities between the figures. Valuation is not an exact science and has been described as being an art and not a science so it may well be that neither are right but neither are they wrong.
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