The Influence of Market Fluctuations on the Property Valuation By Donald Donaldson At Isnare.com Ezine Articles

A look at how property prices and valuation figures are affected by changes in market conditions and the buyer, seller balance.

As a homeowner it is extremely easy to overestimate the value of a property; part of this is personal pride, part of it is a misunderstanding of the market. This is why the valuation figures given by estate agents and qualified surveyors are often received with disdain by homeowners. Fundamentally a property is simply a commodity for external parties, in contrast a homeowner feels an emotional attachment to a house or flat; often this emotional attachment relates to a price. The problem is that this price is normally too high; meaning once an agent or surveyor has conducted a valuation, the homeowner is often left disappointed. This disappointment is only set to increase however; with malaise in the property market it is almost certain.

Property within the UK is now worth less than it was twelve or even one month ago. This is down to major shifts in the economy and subsequently the real estate markets. In the past decade sellers have been in an extremely beneficial position where they have been able to practically sell their home for any price. This situation was a result of sellers being in a strong position, with properties in high demand. Today a change has occurred; the seller is no longer in the primacy as the number of buyers now looking to buy is now smaller. The result is that with more properties on the market than there are buyers, valuation figures and eventual prices must fall. It is simply a matter of supply and demand.

What has been the root cause of this shift however? Ultimately the property markets are heavily affected by the global economy and inter-bank lending. Unfortunately this lending has been heavily affected by what the media have termed the 'credit crisis'. The cause of this crisis can be traced to the activities of American mortgage brokers who granted high risk lends and were then surprised when the payments were not forthcoming.

The result of this situation was catastrophic, banks effectively shut up shop, ceasing lending to each other as well as to external parties such as home buyers. The effect on the property market is that less people are able to obtain mortgages and hence there are fewer buyers in the marketplace, understandably less buyers means that valuation figures must be lowered to attract what little buyers are out there.

That is not to say that the property markets are in complete disarray, while prices may be falling at unprecedented levels this is the nature of the capitalist system. The constant boom and bust effects mean that prices will rise and fall. Falling prices however are not necessarily the disaster that is touted in the media. While sellers will receive less for their properties the hope is that once the prices plateau again, more first time buyers will be enticed onto the ladder. Whether they will be able to obtain mortgages is still a matter of debate however.

The valuation process takes into account a wide array of considerations and as the market is in a state of flux this process is made that much more difficult. The process requires the surveyor or agent to look at similar properties in the area and then compare these to the property being valued. Naturally no properties are completely the same so an amount of estimation is involved. As a property owner it is important to remember that a balance must be found between receiving a profitable price and one that is attractive to buyers.

It is hoped that this article has made it clear that a valuation figure is always susceptible to changes in the market conditions. While the current situation is not the best for sellers undoubtedly this will change in time.

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