Off-Plan valuation - true value?

TangoLime

I am looking at potentially buying from an off-plan development (completion due in July/August this year). The new build is priced quite a bit higher than many things in the surroundings (and even other new builds) which the developer explains with a more premium / boutique development. That being said, I am worried that I might overpay if I went for this development. With Land Registry & EPC certificates me as an outside can only gain so much insight into what would be a comparable (and therefore true market) valuation.

As I would need to take out a mortgage I would need to get a surveryor to value the flat anyways. Now the question - how reliable are their assessments? If the surveyor were to conclude I am paying the fair price, would it be fair to assume then that this is indeed relatively close to the true market price? Or is he simply comparing to other flats in the development? E.g. in such a scenario I could get the largest discount in the development (i.e. the best valued flat in the development) but still pay more than it would actually sell for in the secondary market. Also, how are surveyors counting new build premiums in? Arguably they would value the property already as if it were to sell on the secondary market (given that is the price the bank would need to achieve)?

Finally, will surveyors be less strict/detailed with their valuation if the LTV is lower than if it was higher?

TL;DR - how reliable is a surveyor's valuation assessment especially in the context of off-plan new builds (leaving aside any market movements which obviously can change the valuation)? Appreciate that they are not the be-all-and-end-all but if the report were to conclude that the valuation is fair (even if it were to be record-setting in the area) can this provide at least some peace of mind?

teachfast

Luckily the valuer won't be fooled by the 'premium/boutique nonsense'.

AdrianC

It's impossible to give a single figure. EVERYTHING is an opinion.

You have an opinion.
The vendor has an opinion.
Your mortgage lender's valuer has an opinion.

Those opinions are all based on a variety of sources - the lender will mostly look at completed sales, you will mostly look at comparables on the market.

davidmcn

The fact it's an "off-plan" valuation rather than, say, the surveyor looking at an already-built newbuild property is unlikely to make any significant difference. But in general, the margin for error is recognised to be larger for newbuild properties than others within an established market - nobody knows how much everything else in the development is going to sell for (or knows for certain what other ongoing sales have been agreed at).

TangoLime

davidmcn said:

nobody knows how much everything else in the development is going to sell for (or knows for certain what other ongoing sales have been agreed at).

Pretty sure I read somewhere that the surveyors have access to already exchanged prices (in the same new build, even if off-plan)? And so should be able to see whether it's in line.

Still - am I assuming correctly that a surveyor looking at this from a mortgage perspective will pretty surely come out rather below than above the fair value (given the bank wants to protect itself)?

Asked differently - did anyone have experience with having confirmed their valuation at purchase but then taking a hit on valuation later on (appreciate that market movements in between will have a major impact too)?

AdrianC

TangoLime said:

davidmcn said:

nobody knows how much everything else in the development is going to sell for (or knows for certain what other ongoing sales have been agreed at).

Pretty sure I read somewhere that the surveyors have access to already exchanged prices (in the same new build, even if off-plan)? And so should be able to see whether it's in line.

Only the buyer and seller know what price something's exchanged at. The information doesn't reach any official central body until after the sale is completed and registered with HMRC and LR.

Still - am I assuming correctly that a surveyor looking at this from a mortgage perspective will pretty surely come out rather below than above the fair value (given the bank wants to protect itself)?

If anything, they'll err on the low side.

Remember, they're setting a value they think is reasonable in the event they need to repossess the property and sell it after you fail to pay the mortgage.

davidmcn

TangoLime said:

davidmcn said:

nobody knows how much everything else in the development is going to sell for (or knows for certain what other ongoing sales have been agreed at).

Pretty sure I read somewhere that the surveyors have access to already exchanged prices (in the same new build, even if off-plan)? 

Any "access" will only be whatever information the developer has given them. So (a) would you trust them and (b) exchanged doesn't necessarily mean that those sales will complete (either at all, or at the original prices), for whatever reason. It's nowhere near as useful a comparison as completed prices.

Newbuild properties always have a premium for being shiny and new, so in the short term at least you'd be taking a "hit" on the second-hand value. Whether that's a "normal" hit or because the original valuation was too high is often difficult to determine.

TangoLime

Newbuild properties always have a premium for being shiny and new, so in the short term at least you'd be taking a "hit" on the second-hand value. Whether that's a "normal" hit or because the original valuation was too high is often difficult to determine.

Thanks, that’s clear. When I try to connect that with the surveyor’s approach of valuation (ie in case of reposession) wouldn’t that mean that inevtiably all new build valuations need to come out as assessing the price as too high (since you pay for that premium but the value when reselling would be lower)? This is obviously not the case in reality but wondering how this is bridged?

Salemicus

You are looking at this all wrong. There is no "fair" or "true" value of a property. A valuation is a guesstimate of what it might sell for. That's all.

TangoLime

All clear and fully agree with you. Just struggling to assess what part is New Build premium and what part is them simply asking too much so was hoping a valuation report can be a decent reference.

AdrianC

Just make up your own mind, based on what you'd pay for a similar property, and what else this money can buy you.

If you're considering buying this, then I can only presume you've done those comparisons and find this a reasonable number...