The intense demand for property and subsequent bidding wars we saw in 2022 led to talk of down valuations – next year however looks like being very different.
As demand eases, we are starting to see sellers price more competitively in the hope of attracting offers; meaning buyers could start to offer under, not over, the asking price.
We are already anticipating a fall in house prices – although the latest Land Registry statistics for October actually showed a monthly increase – and as uncertainty develops, an accurate valuation will be key for lenders, sellers and buyers.
During Covid-19, we saw an increase in the use of Automated Valuation Models (AVMs) and desktop valuations, due to the pandemic making in-house visits impossible.
Much like in the advice market, technology has its part to play, but you cannot beat the human touch when it comes to surveying.
The recent revelations around spray foam insulation and its ability to make some properties unmortgageable highlights some of the smaller but critical details an AVM can miss.
A steel framed property is one such example. Such a structure does not fit all lender’s criteria, but this may only be visible through a physical survey. No data is flawless and while AVMs rely on complex algorithms, they are no substitute for a real-life inspection of a property.
It may have been a number of years since a valuation was undertaken and as such, the condition of a property may have deteriorated or been improved significantly since its data was last collected.
There may also be changes to the surrounding area that need to be factored in and could influence pricing – which again, may not be visible to an automated system.
There are risks to buying anything without seeing it first and for lenders, offering a mortgage on a property is no different. Unlike other items bought ‘online’ there is no option for a lender to return or exchange the mortgage.
If house price falls become a regular occurrence in the market, local knowledge of an area and up to date accurate sales data to draw comparisons against will be invaluable. Even at times of house price reductions, there can be stark contrasts between two houses in proximity, with all manner of differentials to factor in.
As we move into 2023, we may also see the energy efficiency of a property become of increased importance to lenders. An in-person assessment of a property will highlight any flaws in the property’s efficiency or may even discredit an existing Energy Performance Certificate (EPC) rating.
Like the rest of the mortgage market in 2022, surveyors experienced some capacity constraints due to the exceptional level of demand. This year we don’t envisage those same constraints, with the majority of surveys being carried out in less than 48 hours.
While the last 12 months brought a rapid rise in house prices, we may see the reverse trend for 2023 if prices lower. Come the new year, as competition increases and demand grows from remortgagors and homebuyers, in-person valuations will offer security amidst any house price uncertainty.
Simon Jackson is managing director of SDL Surveying
