The ownership and selling of property is seemingly always an emotive issue. If you speak to any workers in the industry such as estate agents they will say that the hardest part of the job is making an accurate property valuation. This is not only because the process of making a detailed valuation is difficult requiring a great deal of knowledge and skill but relating this to the homeowner can often require much tact and diplomacy. This is normally due to the fact that homeowners usually have a grossly overestimated idea of the worth of their property, once they are told the actual price, disappointment is a common reaction.
This reaction however is only more likely to arise however in the current property market. The general consensus of analysts is that nationally the value of property seems to be falling at a fair rate. This is not true all over the country as areas such as London and the South East seem to be experiencing price increases but if taken as an average the price of property is falling. Some rather sensationalist spectators have even stated that the current conditions have not been seen for almost thirty years, since the last major recession. Seemingly with major investment groups and banks experiencing trouble at the present time, the harbingers of doom may have a point. Ultimately an effect on property valuation figures is inevitable, as the market experiences a period of flux and uncertainty.
Fundamentally the value of a property is only worth what a buyer is willing to pay for it. In a market where there are a limited number of buyers it means that valuation figures will have to drop in order to entice them. This has not always been the case, over the last decade or so, the market has been heavily swayed in favour of the seller, with an abundance of buyers who had to pay higher prices in order to purchase properties. The emphasis however has now shifted; due to a tightening of belts from mortgage lenders the number of buyers has understandably dropped. The result is that sellers must lower their prices to make properties more appealing to buyers.
This rather pessimistic view however is not held by all. Some experts have put forward the argument that a drop in prices will not necessarily be a bad thing. In time, the mortgage lending situation will settle and this will allow many first time buyers and existing homeowners to take advantage of lower property prices. This view, while not held by all is predominantly the argument of the more optimistic spectators. Clearly with prices dropping the chance to grab a bargain is almost certainly going to increase.
As a result of all of these variances it is important to realise that estate agents have a great deal of difficulty when formulating a property valuation. Fundamentally the process involves taking a house or flat and then comparing it to similar properties in the area. However, homes vary immensely in terms of quality, state of repair as well as layout and size, hence without specialist knowledge it is difficult to arrive at an accurate figure. Once these factors are combined with the current market conditions it is possible to find a figure. With the market in a state of flux however, errors are almost certain to occur.
Hopefully this information has given homeowners a better understanding not only of the valuation process but of the ways in which market fluctuations affect prices. While it refers to the current situation; much of what has been said is general enough to apply to the market in a variety of situations; the product being an article that reveals the effects that economic factors have on property prices and how this makes the work of estate agents more difficult.
Real estate expert Thomas Pretty looks at how property valuation figures are calculated and affected by market conditions.