Demand for valuations plummets

Requests for property valuations have collapsed, according to a valuation franchise owner in Auckland.

Rene Mclean owns a branch of Property Indepth and operates mainly in the south-east of the city, and said that last year, his team could be declining 20 requests for valuations a day because they did not have the capacity.

He said these days hewas getting about two jobs a week, and valuerswere having to work with sellers who had overinflated ideas of what their propertieswere worth, and were sometimes angry when theywere told otherwise.

‘‘You get some people who are just on another planet thinking they will get the same value they got a year ago,’’ Mclean said.

With the drying up of demand has come a fall in the price valuers are receiving for a valuation as well.

CoreLogic data show the average price paid for a valuation in Augustwas 8% lower than a year before, with the average valuation coming in at $862 – or roughly $74 less than a year ago.

CoreLogic head of banking Alan Gilbert said the fall in valuation costs came as no surprise, given the weakmarket conditions, and reports of fewer valuations driven by low property demand and sales.

‘‘I expect to see costs fall away further, albeit gradually, as property values continue to decline. This is because property valuation prices typically rise and fall in line with property values and market activity,’’ he said.

Gilbert said a slower market, and one which has gone through an inflection point (in this case from quickly growing to quickly falling) was harder to value in.

Mclean is also a qualified valuer and a property investor. He employs two other valuers as contractors, and despite work being slower, he said none had considered leaving the industry.

He said as the market downturn continued, those trying to refinance their home or getting a valuation prior to switching their mortgage provider were often the most disappointed at the lower estimates, because it limited their options.

More borrowers kept on highrisk rates

Falling priceswere also keeping more borrowers on the higher interest rates that came with lowerdeposit loans.

‘‘For peoplewho have only put in maybe a 5%, 10%, 15% deposit, they may be on a low-equity margin,’’ he said.

‘‘If themarket is going up they can generally then have a larger amount of equity and pay a lesser interest rate.

‘‘But in a falling market that’s not going to happen, so it’s a bit tougher.’’

Developers were particularly bad formaintaining unrealistic expectations, and refusing to drop prices.

‘‘Some properties are still sitting there after ninemonths and not selling, whichmust be a bit of burden financially on them [developers].’’

Mclean said last year there were farmore buyers paying for valuations.

Many sellers were relying on automated estimates provided by websites like Homes.co.nz, but thesewere lagging behind the times and could be out of date.

‘‘People can get unrealistic expectations, and there’s headlines all over the place, and theywill pick the one that suits them the most and think that’s reality.’’

He said prices had been declining in his areas about 2% per month, and now sit roughly 15% below the peak of the market.

In real terms, with inflation taken into account, Mclean estimated values were about 20% down in the last nine months.

Property Indepth director Steve McNamara said valuers concentrated on providing an estimate for a property’s value on the day.

‘‘We can’t predict the future. We can look at trends and provide commentary on whether that trend is going to continue or not, and part of our report, the risk section, is dedicated to that,’’ he said.

McNamara said large data firms which provided running averages of house prices often did not pick up on how themarket downturn was playing out in specific areas, such as Auckland’s apartment market.

‘‘The average price in Auckland might have come back 15%, the average apartmentmight have come back 20% or 25%,’’ he said.

‘‘A vacant section in Auckland might have come back 30%, down here [in Havelock North] it might have come back 20%. Wellington it’s likely to have come back even more becauseWellington has had one of the largest decreases in New Zealand.’’

‘‘It’s not very constructive to be talking about averages.’’

On the other hand, Canterbury prices remained strong asmore people moved there in order to afford a home.

Angst from buyers

McNamara said valuers were getting the most grief from those building new properties.

‘‘We are getting angst from propertieswhere we valued them off-the-plans six, nine, 12 months ago, 18months ago, and now they’re completing the development and some of them have come back 15% or 20%.’’

He said if the new lower valuation meant the buyer could not get finance, they could lose their deposit, or be sued by the developer for the difference betweenwhat they said they would pay for it and what the developer was able to sell it for.