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  • FIRST POST
    • LdnFtB
    • By LdnFtB 13th May 17, 6:03 PM
    • 37Posts
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    LdnFtB
    First Time Buyer - How to Value a Property?
    • #1
    • 13th May 17, 6:03 PM
    First Time Buyer - How to Value a Property? 13th May 17 at 6:03 PM
    Hi everyone,

    I'm looking for some guidance as to how to value a property in order to make an offer. The methods I'm using seem to result in a big difference (sometimes up to 20-30%) between the value I see and the asking price. Am I being too precise or are the sellers this deluded in what they're looking for?!

    The estate agents generally try to justify the asking price using properties with a similar description (I.e. 2 bed ex council) but when the actual sizes of the flats can vary as much as 15-20m2 and sales were as long as a year ago I'm loath to use such a broad brush measure.

    For background, I'm looking for a flat in London, Islington.

    The first method I'm using is quite crude - I find the last flat that sold in the same block and increase that amount by the local house price inflation as measured by the Land Registry. This has left me with 10% differences between value and asking price.

    I use the land Registry rather than the Nationwide or Halifax indexes as it allows you to sort by local authority and includes all sales, not just mortgages.


    The second way I look at value is to look at similar sales in the area and figure out the price / m2 paid for those properties and apply that to properties that I'm looking at. I think this is more accurate than simply going with the broad description. This also results in about 10% difference between apparent value and asking price.

    The final method I'm using is to track the actual flat I'm looking at against the Land Registry index for the area. Say for example the flat I'm looking at was bought in Sep 2008 for £230,000. The Land Registry House Price Index for Islington Flats and Maisonettes was at 63.8 at that point. It's now at 100.2 - which implies that the value now ought to be ~£360,000. This valuation is 20% off the asking price!

    Am I being too pernickity, or am I reading the local market right and it's the sellers who are being a bit silly (some asking prices are 15% higher than they were last year )
Page 2
    • Crashy Time
    • By Crashy Time 15th May 17, 1:06 PM
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    Crashy Time
    Beg to differ. Most houses have compromises and it's a rare few which sell on Day One. Even then, the thread would exist. I've never in my lifetime (and never will) seen a list of houses on RM all SOLD, or all selling on the day they're up. Impossible. Tosh.
    Originally posted by hazyjo

    Nobody is claiming a house should sell on day one though, just that a market where people literally have houses on the market for years without proceedable offers is broken. The government know this, hence the reason they have started to put the brakes on the BTL market.
    • hutman
    • By hutman 15th May 17, 1:08 PM
    • 67 Posts
    • 25 Thanks
    hutman
    Sellers might be desperate to cash in their windfall for the 1 bed shoe box on sale, but as OP says they're being inflexible.

    Thats because these couple of months represent the last of riding the wave - desperate they're hoping the ignorant to bite. The house of cards is about to come tumbling down if not for Carney's basement rates. Cant wait.
    • ReadingTim
    • By ReadingTim 15th May 17, 1:27 PM
    • 1,679 Posts
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    ReadingTim
    Thats because these couple of months represent the last of riding the wave - desperate they're hoping the ignorant to bite. The house of cards is about to come tumbling down if not for Carney's basement rates. Cant wait.
    Originally posted by hutman
    You wanna get yourself over to housepricecrash.co.uk then - they've been waiting for over 10 years...
    • hutman
    • By hutman 15th May 17, 1:37 PM
    • 67 Posts
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    hutman
    Membership to the EU wasnt under threat 10 years ago.
    • ReadingTim
    • By ReadingTim 15th May 17, 1:42 PM
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    ReadingTim
    Membership to the EU wasnt under threat 10 years ago.
    Originally posted by hutman
    You're right. This time it's different. It's just around the corner. In fact, any time now....

    You mark my words. Any day now....

    Soon...be patient....

    and so on.
    • hutman
    • By hutman 15th May 17, 1:59 PM
    • 67 Posts
    • 25 Thanks
    hutman
    What Im posting is not hyperbole - its backed up my market fundamentals which will reveal themselves to you via a simple google search. Even before the referendum conundrum London's housing bubble was completely out of tune with people's incomes. After brexit - we will simply have the necessary cooling effect (does a change in wording help you?). Population growth is overwhelmingly one the main contributors to the bubble - and whether you like it or not immigration will be right at the front of the queue when exit negotiations start.

    Seems like anytime the housing status quo is challenged on these forums - the outcome is mud slinging. I havent been around for 10 years, so cant entertain the countless anecdotes you may have amassed. Im a prospective FTB looking to assess my risks as i embark on the most important economic decision of my life. So i will assign as much cynicism and doubt as i want, provided i can back up my argument..
    • Crashy Time
    • By Crashy Time 15th May 17, 2:04 PM
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    Crashy Time
    You wanna get yourself over to housepricecrash.co.uk then - they've been waiting for over 10 years...
    Originally posted by ReadingTim

    Not for a buyer though, which would be slightly worse IMO, especially if you are attached to a massive debt.
    • Crashy Time
    • By Crashy Time 15th May 17, 2:05 PM
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    Crashy Time
    Membership to the EU wasnt under threat 10 years ago.
    Originally posted by hutman

    Neither was the masses love affair with BTL.
    • ReadingTim
    • By ReadingTim 15th May 17, 2:36 PM
    • 1,679 Posts
    • 2,433 Thanks
    ReadingTim
    What Im posting is not hyperbole - its backed up my market fundamentals which will reveal themselves to you via a simple google search. Even before the referendum conundrum London's housing bubble was completely out of tune with people's incomes. After brexit - we will simply have the necessary cooling effect (does a change in wording help you?). Population growth is overwhelmingly one the main contributors to the bubble - and whether you like it or not immigration will be right at the front of the queue when exit negotiations start.

    Seems like anytime the housing status quo is challenged on these forums - the outcome is mud slinging. I havent been around for 10 years, so cant entertain the countless anecdotes you may have amassed. Im a prospective FTB looking to assess my risks as i embark on the most important economic decision of my life. So i will assign as much cynicism and doubt as i want, provided i can back up my argument..
    Originally posted by hutman
    Mate, it's your money and you don't have to argue with or justify it to anyone as to how you do, or don't spend it. And if you want to add your opinion to the well-rehearsed debate then expect to get counter-opinions expressed equally as strongly. But present your opinion as fact and dismiss others as anecdote then you're going to get some mud slung your way.

    The fact of the matter is that no-one can predict the future, so it's all crystal-ball gazing, but short of psychic ability, the only thing we have to go on is past performance, which, over the last 20 years, doesn't really back up your opinion much.
    • Crashy Time
    • By Crashy Time 16th May 17, 12:39 PM
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    Crashy Time
    Mate, it's your money and you don't have to argue with or justify it to anyone as to how you do, or don't spend it. And if you want to add your opinion to the well-rehearsed debate then expect to get counter-opinions expressed equally as strongly. But present your opinion as fact and dismiss others as anecdote then you're going to get some mud slung your way.

    The fact of the matter is that no-one can predict the future, so it's all crystal-ball gazing, but short of psychic ability, the only thing we have to go on is past performance, which, over the last 20 years, doesn't really back up your opinion much.
    Originally posted by ReadingTim

    Still hard to deny that the UK property market would have collapsed without zero rates, or that it is showing signs of faltering now?
    • Crashy Time
    • By Crashy Time 19th May 17, 9:41 PM
    • 4,391 Posts
    • 2,020 Thanks
    Crashy Time
    What Im posting is not hyperbole - its backed up my market fundamentals which will reveal themselves to you via a simple google search. Even before the referendum conundrum London's housing bubble was completely out of tune with people's incomes. After brexit - we will simply have the necessary cooling effect (does a change in wording help you?). Population growth is overwhelmingly one the main contributors to the bubble - and whether you like it or not immigration will be right at the front of the queue when exit negotiations start.

    Seems like anytime the housing status quo is challenged on these forums - the outcome is mud slinging. I havent been around for 10 years, so cant entertain the countless anecdotes you may have amassed. Im a prospective FTB looking to assess my risks as i embark on the most important economic decision of my life. So i will assign as much cynicism and doubt as i want, provided i can back up my argument..
    Originally posted by hutman

    Getting harder to do now though with any credibility as the MSM and most of the country have woken up to the fact that the property bubble needs to pop?
    • MobileSaver
    • By MobileSaver 21st May 17, 5:38 AM
    • 1,161 Posts
    • 1,586 Thanks
    MobileSaver
    Getting harder to do now though with any credibility as the MSM and most of the country have woken up to the fact that the property bubble needs to pop?
    Originally posted by Crashy Time
    You and your friends over at HPC have been saying that for almost 14 years now... 14 years!

    Meanwhile, back in the real world, most people have just got on with their lives, bought themselves a home to live in and I suspect the vast majority are very happy with the decision they made.

    It's the classic glass half full or half empty scenario and you only need to read the increasingly desperate posts on HPC to realise which category they fall into...

    March 2015 "Are The Shires Crashing?"
    by HPC
    Apparently not as prices are up around 14% since HPC proclaimed two years ago "It is bound to happen."
    Respect to 3 of the greatest actors of all time; amazing people who are totally believable as the characters they play & almost single-handedly make the shows they starred in:

    Peter Dinklage as Tyrion Lannister in Game of Thrones
    Daniel J. Travanti as Frank Furillo in Hill Street Blues
    Claire Danes as Carrie Mathison in Homeland
    • Tiners
    • By Tiners 21st May 17, 7:50 AM
    • 142 Posts
    • 165 Thanks
    Tiners
    Mate, it's your money and you don't have to argue with or justify it to anyone as to how you do, or don't spend it. And if you want to add your opinion to the well-rehearsed debate then expect to get counter-opinions expressed equally as strongly. But present your opinion as fact and dismiss others as anecdote then you're going to get some mud slung your way.

    The fact of the matter is that no-one can predict the future, so it's all crystal-ball gazing, but short of psychic ability, the only thing we have to go on is past performance, which, over the last 20 years, doesn't really back up your opinion much.
    Originally posted by ReadingTim

    It's quite interesting that you should use the last 20 years as your time scale for looking at the performance of the housing market...

    From what I can see there have been 2 distinct phases of rampant house price inflation (HPI) in that time period, both caused by very specific reasons, non of which should have occurred in what is supposed to be 'free' market but with regulated lending.

    Late 90's - 2007 We had rampant HPI due to irresponsible and often fraudulent lending by the banks >100% mortgages, io mortgages, liar loans etc etc

    Post 2008 - Present day We've had rampant HPI due to massive amounts of govt and Central Bank intervention in the housing market with FLS,QE, ZIRP, HTB etc etc

    How do you think the housing market would have performed in your stated time period without the issues I've outlined above? And how do you think it will perform in future assuming these things aren't repeated?
    • Crashy Time
    • By Crashy Time 21st May 17, 3:48 PM
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    Crashy Time
    You and your friends over at HPC have been saying that for almost 14 years now... 14 years!

    Meanwhile, back in the real world, most people have just got on with their lives, bought themselves a home to live in and I suspect the vast majority are very happy with the decision they made.

    It's the classic glass half full or half empty scenario and you only need to read the increasingly desperate posts on HPC to realise which category they fall into...

    Apparently not as prices are up around 14% since HPC proclaimed two years ago "It is bound to happen."
    Originally posted by MobileSaver

    2003? The bubble was just getting started then, and cheap credit was everywhere with a government/public on the side of pumping up the housing market, so I can`t see that your point has much relevance to the present political/economic reality?
    • economic
    • By economic 21st May 17, 4:38 PM
    • 1,580 Posts
    • 737 Thanks
    economic
    2003? The bubble was just getting started then, and cheap credit was everywhere with a government/public on the side of pumping up the housing market, so I can`t see that your point has much relevance to the present political/economic reality?
    Originally posted by Crashy Time
    2017 - 2003 = 14 years. about 15% of the average lifespan. a huge chunk of lifespan worrying about housing being a bubble and therefore not buying. if you had the means to buy in 2003 but didnt because you thought it was a bubble, you were really very stupid.
    • Crashy Time
    • By Crashy Time 21st May 17, 5:41 PM
    • 4,391 Posts
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    Crashy Time
    2017 - 2003 = 14 years. about 15% of the average lifespan. a huge chunk of lifespan worrying about housing being a bubble and therefore not buying. if you had the means to buy in 2003 but didnt because you thought it was a bubble, you were really very stupid.
    Originally posted by economic

    What about if you bought last week, or next week, is that very stupid or very smart?
    • economic
    • By economic 21st May 17, 10:34 PM
    • 1,580 Posts
    • 737 Thanks
    economic
    What about if you bought last week, or next week, is that very stupid or very smart?
    Originally posted by Crashy Time
    as a home to live in it is smart. you are taking advantage of low rates and not wasting money on renting. its silly to try time a market. market in london has already slowed and prices starting to drop. its probably a good time now as any to look for a bargain.
    • Crashy Time
    • By Crashy Time 22nd May 17, 11:36 PM
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    Crashy Time
    as a home to live in it is smart. you are taking advantage of low rates and not wasting money on renting. its silly to try time a market. market in london has already slowed and prices starting to drop. its probably a good time now as any to look for a bargain.
    Originally posted by economic

    I think we will have to agree to differ on the concept of a "Bargain"...
    • getmore4less
    • By getmore4less 23rd May 17, 7:15 AM
    • 29,130 Posts
    • 17,421 Thanks
    getmore4less
    You need to understand better where the variations are in your methods, there are so many things that can influence the pricing that statistical approaches have significant short comings.

    The broad overview average to average gives an idea of the trend which can be helpful.

    if you go more narrow to say a street or a single block, the volumes may be insufficient to get a trend but might pick up a deviation from the broader view.

    Ie. is a particular block or street rising faster or slower, any factors that might be doing that, could be some planning application is going to make the area a bit better or a bit worse, could something simple like the street parking policy changed or permits went up and this block has private parking.

    .........

    looking at your particular methods.


    ...........

    The first method I'm using is quite crude - I find the last flat that sold in the same block and increase that amount by the local house price inflation as measured by the Land Registry. This has left me with 10% differences between value and asking price.

    I use the land Registry rather than the Nationwide or Halifax indexes as it allows you to sort by local authority and includes all sales, not just mortgages.

    That is using a specific place to a broad average that will work if that particular flat was an average one and sold on trend, might be worth doing it for more than one and to factor in any unique features those have against the rest of the block.
    Chances are that is similar to what the EA and vendors are doing this is what palces a re selling at so add a bit.



    The second way I look at value is to look at similar sales in the area and figure out the price / m2 paid for those properties and apply that to properties that I'm looking at. I think this is more accurate than simply going with the broad description. This also results in about 10% difference between apparent value and asking price.

    That's a broad value for money is space, where that can be handy is looking for the outliers, why is these smaller place selling for more money than others, will hint that a particular block may be more desirable than the others, sample size will improve the results.

    The final method I'm using is to track the actual flat I'm looking at against the Land Registry index for the area. Say for example the flat I'm looking at was bought in Sep 2008 for £230,000. The Land Registry House Price Index for Islington Flats and Maisonettes was at 63.8 at that point. It's now at 100.2 - which implies that the value now ought to be ~£360,000. This valuation is 20% off the asking price!

    the problem here is it is similar to the first method just using much older data, the last sold price of a specific property
    Originally posted by LdnFtB
    What might be a good addition to this last method is to also look at similar places that sold around the same time to see where the specific sits, did it sell cheap or expensive at the time.

    then of those have any sold since were they above or below the index.

    All sorts of things can impact prices on a temporary basis, lack of very local supply(nothing in the block for sale for ages) or a sudden glut(3-4 places at the same time) could put a significant swing in the trend for a short periods.

    Another thing to look at is market time, a place may have completes in Sept but that could have been a slow sale so the offer went in at March prices.


    you can analyse and overthink till the cows come home, but if your methods keep telling you people are buying places at prices that are too high then you could be some time before you get somewhere.

    Remember that buying takes time so in a rising market the asking prices will reflect optimism that by the time they find a buyer the market will have moved up anyway
    • MobileSaver
    • By MobileSaver 23rd May 17, 9:42 AM
    • 1,161 Posts
    • 1,586 Thanks
    MobileSaver
    its backed up my market fundamentals which will reveal themselves to you via a simple google search.
    Originally posted by hutman
    The only fundamentals that really count are that more and more people want their own home (demand) and we're not creating anywhere near enough homes (supply) to satisfy that demand. Until the fundamental law of supply and demand is addressed prices will continue to rise over the mid to long term.

    There will be peaks and troughs along the way affected by localised and short-term issues (e.g. uncertainty over the aftermath of Brexit) but over the mid to long term it's a complete no-brainer which way prices will go.

    Until and unless there's a seismic political shift in housing policy the 50%+ house price crash that the HPC crowd long for is never going to happen. To make matters worse for the HPCers the sad truth is that even in the practically unthinkable situation that house prices crash by almost 40%, all that would do is bring them back to the same levels as when the HPC site started! So they've waited 14 years and gained absolutely nothing (except lived in places they don't want to live, felt angry at the world in general, ruined countless relationships along the way and missed out on being half way through a mortgage and thus half way towards owning their own property outright...)
    Respect to 3 of the greatest actors of all time; amazing people who are totally believable as the characters they play & almost single-handedly make the shows they starred in:

    Peter Dinklage as Tyrion Lannister in Game of Thrones
    Daniel J. Travanti as Frank Furillo in Hill Street Blues
    Claire Danes as Carrie Mathison in Homeland
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