Surveyors regain confidence in housing market

Surveyors’ confidence in the housing market is returning, according to new figures from mortgage and property outsource specialist Xit2. In May, the average property valuation was 95% of the price people paid for their home. At the peak of the housing market in May 2007, surveyors’ average valuation was 98% of the offer price.

Confidence in house prices plunged in 2008 and October last year saw valuer confidence at an all time low with the average property valuation at just 92% of the offer price. But the outlook for house prices has improved in 2009, and the difference between mortgage valuation and offer price has contracted. Xit2 analysed mortgage application and valuations data from over 1.3 million housing transactions over the past three years to produce the numbers.

Mark Blackwell, sales director at Xit2, said, “This ratio is the best indication of confidence in house prices you can get. Even in a rising market, surveyors are cautious about valuing a property at 100% of the offer price, but with the outlook for house prices so dreary at the close of 2008, they were really hedging their bets. Valuing a property at 92% of its market value means they’re covered when house prices fall 2% the next month, or 5% in six months.

“Valuers are conscious that valuing a property so close to its offer price can leave lenders exposed in a falling housing market, particularly if the borrower is taking out a mortgage on a large proportion of the property value. If the market believes house prices have much further to fall, surveyors will be much more conservative in their valuations – regardless of what buyers and offer prices are doing.”

Surveyor confidence, indicated by the monthly change in valuation to offer price ratio, was up 1.1% in May from April, but the year on year comparison shows that confidence in a house price recovery is down from May last year.

Mark Blackwell continued, “Valuers are cautious and, despite the recent reports that house prices are actually rising again, they’re playing it safe when valuing properties for mortgage purposes. So the gap between valuation and offer price narrowing is a clear signal that house prices look more stable to those at the property market coal face.”