Quite simply, that’s not the case, and certainly from an adviser perspective there are lots of positives to focus on, especially around demand for advice and the ongoing opportunities this creates.
From our perspective though we have to segment what might potentially happen in the future, from that which is the here and now. It is after all, the present in which we advise in, not the future. If only others within our sector were willing to do similar.
The down valuation debate
For instance, down valuations are a constant source of ‘joy’ at present for the adviser community, with surveyors often leaving us with plenty to think about in terms of what they are actually basing their valuations on.
An area not often covered in the great down valuation ‘debate’ is that of equity release, but in recent weeks on every single lifetime mortgage case we are attempting to progress, there has been a down valuation on all of them.
Why this might be is certainly a question to ponder and on one specific case recently it led us to phone the surveyor up to ask why they were valuing at a price clearly below what everyone else perceived it to be. The answer was somewhat bewildering in that the lender concerned was apparently asking the surveyor to take into account a future ‘for sale’ value within the valuation right now.
Again, we are constantly told by the surveying community that their valuations are based on the specifics of the property as it is right now, as if it was selling on the day it was valued, not some arbitrary point in the future which is only likely to be guess work. So, why have any sort of go at guessing what it might be in five, 10 or 15 years’ time?
Negative perceptions
Surveyors are likely to hedge their bets in this scenario. Some can be notoriously negative about future house price values, even if recent history tells us that prices are likely to rise over a long-term period, especially given the supply side issues we have in this country.
And therefore, we get a down valuation that makes no sense.
Plus of course, this is an equity release case, which might lead you to wonder why the lender concerned is acting so neurotically about what the value of the house might be in future years. Well, you might argue, the client will be older, they might die sooner and therefore the lender will want to know what the resale value is potentially in a very short space of time? That we’re afraid in this case is nonsense.
Our client was 75-years-old, and the statistics show that those individuals who reach this age have a very good chance of living for at least another 11 years if they’re male and close to 13 years if they’re female. Equity release clients who are in a couple often mean that at least one of them will go beyond 15 years’ life expectancy.
Lifetime mortgage providers will know this, they will also be aware of the health situation of the client, but what they will certainly have no clue about – and neither will the surveyor – is just what the ‘for sale’ value of the property will be in 11-15 years’ time.
That is a finger in the air exercise which renders the projection the surveyor puts on it, absolutely meaningless, and essentially puts a spanner in the works for a case which makes perfect sense for both client and the lender.
Dealing with the current situation
We can understand why there is an inclination to go to a point of ultra-caution when looking at future house price values with such pressure being brought to bear by lenders. After all, if the property – as is likely – sells for more in the future, then there will be no complaints and no comeback.
However, our cases are not decided in the future – or at least they shouldn’t be. And they should therefore not be potentially derailed by a future guess that is only ever likely to be wrong.
Show us anyone who has accurately predicted the value of a single property 10 or 15 years out and got it right, and we will show you a liar.
It is almost impossible, so let’s deal in today’s reality, not the unknowns of hypothetical ‘sales’ years in the future.
