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Down valuations result in £8k house price shortfall

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Written by: Shekina Tuahene
01/09/2022
Down valuations across the UK property market are forcing buyers and sellers to negotiate an average shortfall of nearly £8,000 that lenders are unwilling to provide.

House sales which have seen down valuations are being devalued on average by 2.8%, according to HBB Solutions.

The current typical house price in the UK is now £286,397, leaving a £7,978 gap as a result of lenders viewing properties as worth less than the asking price. 

This means sellers either have to lower asking prices or buyers must stump up the extra cash to close the gap. 

With a typical 25% deposit currently standing at £71,599, the additional money could push the deposit to 27% of a property’s value. 

Regional differences 

The East Midlands are where the largest down valuations are happening, with an average 3.3% reduction accounting for a shortfall of £8,109. In the East of England, where the typical asking price is revised down by 2.3%, this represents a cash gap of £8,090. 

In Scotland, down valuations are worth an average of £8,089, which is a 4.3% readjustment of the asking price. In Wales, this figure is £8,059 and in the South West, homes are being valued at £8,011 less than the asking price. 

The down valuation shortfall is smaller in the North East, where buyers and sellers are left to renegotiate an average gap of £7,638. 

Lenders getting cold feet 

Chris Hodgkinson, managing director of HBB Solutions, said: “Down valuations are a worst case scenario for buyers and sellers who have already danced the dance to agree a sale price on a property. Unfortunately, they can be a common occurrence and one that is only going to increase as the market enters a period of heightened instability.”

He added that we are not seeing is recognition of these changing market conditions from the nation’s home sellers, who remain intent on securing the highest price possible for their home.

“At the same time, low stock levels mean that many buyers are still meeting them at this inflated price point in order to secure a home and before the cost of a mortgage climbs any higher,” he said.

“However, following a string of interest rate rises, many mortgage lenders are now starting to get cold feet and reduce their rate of lending in anticipation of things to come. The result of which is a far greater number of homes being subject to a down valuation and by quite a margin, leaving home sellers and buyers to go back to the drawing board in order to get an offer finalised.” 

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