Tuesday, Aug 11, 2009
Tuesday afternoon at the Comedy club
Mortgagestrategy: Lenders undervaluing properties, claims NAEA
Peter Bolton King, chief executive of the NAEA - “We all know that valuation is not an exact science and you can understand under current market conditions people erring on the side of caution. But is it fair that they value a property based on what might happen in the future rather than what is happening today?"
Posted by jack c @ 03:07 PM (1213 views) Add Comment
12 Comments
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1. Kernow said...
Maybe my boss can set my wages using this logic???
You never know we might have a really good year in 2012 and he better pay me for the work I may or may not do.
2. paul said...
Desperately trying to turn the market round now before the unemployment tidal wave is upon us.
It is pathetic really though - it reminds me of a convicted murderer pleading before a firing squad. The fact that the BBC picked up the stary and ran with it the other day actually makes it even less credible.
Shame on the BBC etc.
3. This comment has been removed as it was found to be in breach of our Blog Policies.
4. mrflibble said...
Yep it sure is a pity, all those sellers not getting their hands on all that lovely money.
The daft 125% mortgages of yesteryear were based on future higher prices and I cannot remember anyone crying foul play when that racket was going on. Off course Lenders are undervaluing, they know what's coming, once bitten, twice shy...
At the end of the day something is only worth what someone is willing to pay for it. The buyer can throw down any offer he likes to meet the sellers deluded idea of market value, but it's isn't actually the buyer who is buying the place at the start, it's the Lender. The buyer is merely renting from the Lender until the glorious day comes that the last mortgage payment is made, then, and only then, will the buyer own the house.
5. jack c said...
What a bunch of clowns these people are
(1) The lender has to assess the overall risk including the prospect of a fall in property prices - offer to completion period springs to mind in the current market
(2) It might be a case of EA's overvaluing rather than the lender undervaluing
6. bystander said...
A little off topic, but thought the following was worth a mention. From an article on the Bloomberg site regarding China's stimulus and dropping exports etc; "I feel that some industries are expanding too rapidly. For example, housing prices are rising too fast, and housing sales are growing too fast.” President Zhang Jianguo of China Construction Bank Corp. said last week. The nation’s second-largest bank, will cut new lending by about 70 percent in the second half to avert a surge in bad debt" (http://www.bloomberg.com/apps/news?pid=20601089&sid=aLEXwKJ92zvo )
If only our own, greed frenzied western bankers had had the same thoughts a few years back, this could all have been avoided.
7. greenshootsandleaves said...
A lecture on fairness and ethics from a guy representing ... estate agents. If the BBC could somehow turn it into a comedy programme there's no way they'd come back from the Montreux festival empty-handed! That said, it's a bit of an own goal from our friend PBK, giving the impression that he has very little faith in the sustainability of the current 'recovery'.
8. Dissavowed said...
Average House Prices: Source: Nationwide.
2007 Q1 £175,554 !!!!!
2003 Q1 £119,938 !!!!
1999 Q1 £67,478
1997 Q1 £55,810
1995 Q1 £51,084
1987 Q1 £40,882
Anyone who can add up, can see that it was 1999 when this bubble really started to inflate.
tTo return to historically sustainable levels, the average house price should be about £75k.
Not £175k........
9. icarus said...
bystander @5 - Western bankers had no incentives to exercise China's prudence. At some point and at some level western bankers started positioning themselves to get govt bailouts. It's quite likely that the surge in derivatives in 2007-8 was designed in part to make the 'too big to fail' argument more compelling - the waves of potential cross-defaults were too big for governments to even contemplate. China also has the advantage of learning from the west's financial meltdown - and its banks are pretty much state-run anyway.
As for PBK "Here we are trying to lead lambs to the slaughter only to be knocked back by the slaughterhouse".
10. titaniccaptain said...
The Banks that encouraged borrowing and debt are now devaluing the property market leaving homeowners with mortgages in further negative equity....pathetic.
They should write off the negative equity....it was the lenders and the media that got people into debt with ramping and pressure of the banks to borrow through advertising. Only some of us saw this crash coming and we are the lucky ones.
Forget pride in our prudent actions..... many who had no idea they were getting into years of negative equity were duped by the banks and now they stick the knife in.
I did a Vid on this I will post here tomorrow.
Yes part of me is glad to see the banks devaluing over priced houses but if your prepared to devalue then write off a proportionate amount.......................I DON'T CARE HOW MUCH IT COSTS THE BANKS.................its their fault.
11. Fallingknife said...
"“We all know that valuation is not an exact science and you can understand under current market conditions people erring on the side of caution. But is it fair that they value a property based on what might happen in the future rather than what is happening today?"
What a spoon.
12. Karen said...
titaniccaptain - but someone has to pay and it will be the other mortgage holders with higher interest rates and us savers who are currently getting next to nothing in interest on our money.
To be honest I have had a number of homes bought over the years on mortgages, and have never questioned the whole system, but recently I have begun to see the whole thing in terms of the 'Emperors new Clothes'. I cannot get my thougths away from the fact that any property/house can only really be worth the cost of the land and the cost of building plus the current worth of any fixtures and fittings, based on quality and length of useful life etc. Any surplus value has to be considered some sort of 'Goodwill'. Why have our financial institutes allowed this goodwill to be counted in the value of the properties for the purpose of mortgaging. It really now I come to think of it makes no sense at all.
We borrow money to buy these houses with credit from banks that is not backed by gold any longer, to buy houses that in some cases have huge proportions of their value as goodwill. We have all been fools for too long.