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Market valuations leave buyers hanging
Released 30 November 2010

Further interest rate rises will create increasing discrepancies between agreed sale prices and valuations, having a detrimental effect on the number of property transactions and house prices, according to the Real Estate Buyer’s Agents Association of Australia (REBAA).

REBAA President Mr Byron Rose said many valuers were pre-empting anticipated interest rate hikes in their current valuations, causing agreed sales to fall through.

He said a similar trend had occurred just prior to the beginning of the global financial crisis in 2008 when interest rates peaked.

“We aren’t buying two or three months down the track, we’re buying in today’s market and properties should be valued in line with what is occurring at the time of purchase,” Rose said.

“Undervaluing properties creates a situation where sellers have to drop prices to match valuations or where buyers have to make up the shortfall if the contract has gone unconditional, leaving them with little room to manoeuvre.

“While we understand that lenders need to be cautious, the inconsistency with which these valuations occur is neither fair nor ethical for the buyer. We all have access to the same information on recent sale prices, so how is it that there are such big discrepancies in values occurring from one buyer to the next and one valuer to the next on the same property?”

Rose said the current trend was unfairly occurring more often in private treaty sales rather than with properties sold at auction.

“The valuer does not attend the auction, yet how does he know that the property wasn’t passed in and the purchase price negotiated privately, as is frequently the case?” he said.

“At a time like this where there is a large degree of market uncertainty, buyers need help not more conflicting advice from those operating within the property market.”