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How to value property in a 'hot' market
old buckenham posted a topic in General property discussionHello, I have question for anyone who wants to contribute please.... How do you value a property in a 'hot' or quickly inflating market? For the last year or so, I have found it really challenging to confidently assess the value of residential property in the UK. The normal method I would use, which is mainly Rightmove/Zoopla sold prices for the street and immediately surrounding streets has started to bear very little resemblance to what properties are selling for in the current market. I started to pay more attention to the 'Under Offer' section on Rightmove to get a sense of buyer demand on pricing, but for most properties this is currently significantly higher than sold prices...showing that demand is causing fast inflation in most areas. I would previously usually ignore 'For Sale' prices as these are estate agent valuations, which are generally optimistic and often end up being negotiated down or reduced by the seller. However, it does seem in the current market that there are less properties being reduced in price than in previous years. As the majority of properties are bought with residential mortgages, RICS surveyors are obviously approving the valuations on these properties, even though they are often 10-30% higher than the previous sold prices in that local area. I would really like to get a better understanding of how this calculation is made. Are there certain tools, methods, formulas etc (other than the ones I mention in this post) that can be used to confidently tell that a property is correctly valued when it is priced significantly higher than previous sold prices in that area? I always used to ignore the Zoopla home values estimates https://www.zoopla.co.uk/home-values/ - these are so wide ranging that I felt I couldn't use them to accurately predict what most properties would sell for. However, recently I realised that they presumably include 'under offer' prices and some element of % market inflation into their value calculations...and now I am actually finding that the 'High' estimate in this tool is a closer indication to what most properties are selling for than using Rightmove sold prices. Do you include an element of market forecasting in the valuation, as a way of future proofing the risk? For example, if the Savills residential property forecast for that region shows a predicted 4% increase in the next year...would that be used as a buffer to offset the lack of proof available from sold prices due to the inflated value being paid for the property? It seems that as long as the mortgage deposit (e.g. a minimum of 10% for residential and 25% buy-to-let) is more than the uncertainty or margin of error around the valuation, that lenders are probably not too bothered about inflated values, because they know they could repossess the property and sell it for enough to cover their costs and profit? Obviously this scenario is very bad for the property owner who overpays and then has to sell but unfortunately one of the consequences of a housing crash. Finally, auction guide prices. These would usually be set at least 15-25% below what the same property would achieve on the open market, based on sold prices. However, I have recently looked at some new listings for upcoming auctions and many of the guide prices are higher than Rightmove sold prices for the area. This suggests to me that even the 'discount' end of the market is undergoing such strong inflation that valuing a property is more of a leap of faith than a considered calculation at the moment. How do you know that the prices properties are selling for are not overly inflated and would cause negative equity if the market crashes in the next few years? Obviously choosing high yielding BTL properties with the intention of holding them long term would mitigate this risk to a certain extent...but it would mean you wouldn't be able to remortgage to withdraw funds for further investment for potentially quite a long time. Any feedback and advice would be appreciated please. I am interested from both a BTL and flipping perspective, but also as a home owner. Many thanks, James
mickey_b88 posted a topic in General property discussionGood afternoon everyone, I am on my way to becoming fully compliant and want to source some properties for investors so I can build some capital in order for me to become an investor myself in the future. Are there any investors on here looking to invest in the North West area? I am based in Liverpool and have lived in and around Merseyside my whole life so i have a good understanding of the area. Please do get in touch and we can discuss things further. Kind Regards Mike
Looking For Data To Know The Best Place To Invest
Jakub Lesniak posted a topic in The MarketHello, I want to start researching the UK's market but I'm not sure where to start or where I can find the necessary information. I'm looking for stuff like job growth, population growth, new construction and that's all I have come up with- if you have any suggestions about what else I should know - let me know please. Thank you in advance