Down valuations happen. As advisers, we know that. They are clearly not welcome, but – historically, at least – once in a while all advisers will get one, and you have to deal with them at the source.
However, since the start of February this year, this has changed dramatically. What – certainly in 2024 – was a trickle has now become a flood, with around 20% of all our cases, both purchase and remortgage, subject to a down valuation from the surveyor.
The first question we asked was, of course, why?
After all, it’s not as if the down valuations were reflective of the direction of house price travel. Nationwide’s February house price index showed a 0.4% monthly increase, up from 0.1% in January, with an annual figure of 3.9%. Halifax’s corresponding index showed a 0.1% monthly dip, but annual growth remained at 2.9%.
Major discrepancies with remortgaged properties
Now, of course, we understand these indices are relatively narrow in scope and there are always likely to be individual property differences at play here. But, bear this in mind. On remortgage cases, we have seen surveyors coming back with significant down valuations compared to even what the existing lender values the property at.
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We have seen a number of valuations that put the property at a value less than the last time it was bought or remortgaged; different to what it was two, three, or even four years ago.
For example, we had an existing lender value one property at £475,000, but the surveyor came back with a nonsensical valuation of £425,000.
When asked why there was such a big discrepancy, we were told that the comparables being used did not reflect the £475,000 value. However, the comparables were for a property in a different street, a different type of property, and with a different number of bedrooms.
What is behind these down valuations?
In a sense, this put to bed another theory for why we were getting these ‘off values’, which was to wonder whether lenders themselves were telling surveyors to be more cautious, or this was simply reflecting a reduced appetite to lend, or they were somehow trying to slow their own pipeline down.
But none of these answers made sense either, given how competitive the market is, the recent cuts to rates, the appetite we are seeing from sales teams or business development managers (BDMs), etc.
Lenders want to lend, which is why the values they are issuing with their product transfers (PTs) are so much stronger than what we see if it’s a remortgage to another lender that requires a surveyor.
Also, as advisers, we look at valuations to ensure we’re not completely off the mark with our cases, so we view Hometrack, Zoopla, and those lender values – and therefore to see such a big gap is, again, weird in the extreme.
Clearly, a down valuation once in a while is a pain; to have them on a fifth of all cases is beyond the pale. It clearly requires extra work on our behalf to challenge them – in the case mentioned above, I’ve asked the lender to take the surveyor off the panel because of the abject valuation they returned and the reasons they gave for it.
Not forgetting the impact on the client here. The potential to have to pay a higher rate, or find the extra money, the addition of weeks to the overall process in terms of ongoing delays, etc. And yet still there is the nagging question of why, and why now?
Could this be surveyors drawing a line in the sand? The government has talked about wanting the process to have increased digitalisation. Is this an attempt to control the market somewhat and to prove they are still necessary, and have a serious impact? Perhaps, but it still doesn’t feel like it’s the real reason why we have seen this so much in recent weeks.
This left us all scratching our heads, because it could be due to all of the above, or none of the above. But what if it was something else, which, in our circles at least, had gone under the radar?
A new way of doing things?
On 31 January, the Royal Institution of Chartered Surveyors’ (RICS’) update to its Global Red Book – “the benchmark for all valuation professionals worldwide both within and outside its membership”, according to its spiel – became effective.
In that Global Red Book, there is “enhanced guidance on valuation modelling, risk assessment and the integration of artificial intelligence (AI) technologies”.
In other words, if I’m reading this right, surveyors are now having to include different elements within their property valuations as a result – for instance, “mandatory environmental, social and governance (ESG) considerations, requiring valuers to record relevant ESG data and assess its potential impact on property values”.
Could this be what is skewing the valuations?
We may be putting two and two together and getting five here, but it does seem a coincidence that the month after the new Global Red Book was updated and mandated, we begin to see a huge rise in the number of down valuations.
If this is not the reason, then we’re still searching for answers. As a profession, we should be given them, because the big discrepancies we are now getting from surveyors on many properties are having a tangible and negative impact on the lives of our clients and our work. Especially when these figures nowhere near match with anything else, particularly nothing relevant in recent months.
It’s definitely not a one-off and it’s a frustrating trend that requires some explanation. If anyone is able to enlighten us, please do.
