The Daily Telegraph - Saturday - Money
‘My mortgage bills rose 40pc as surveyors down-valued my flat’
‘Proximity to work and transport links are now not as important’
London landlords and flat owners have been hit by massive falls in property values as plummeting rents and a shift towards larger properties have pushed mortgage lenders to re-evaluate prices.
The growth of working from home has caused buyers and renters to move further away from offices, leaving a question mark hanging over the value of flats in the centre of the capital.
Inner London rents were down 11.5pc year- on-year in December, according to Hamptons International estate agents.
The numbers have spooked surveyors, resulting in an increasing number of “down valuations”. This is when a property is assessed in a lender’s survey as being worth significantly less than the agreed sale price. It is particularly hitting London landlords because of the dramatic fall in rents recorded.
Tushar Patel, 42, is a portfolio landlord with 15 tenancies in London. Five years ago, he purchased a threebedroom flat in central London for £550,000 with a 25pc deposit.
In November, his five-year fixed term expired and he tried to remortgage. His lender’s surveyor then valued the property at £485,000, which was £65,000 less than Mr Patel paid for it. This meant he was unable to remortgage the property and was moved on to a standard variable rate. His monthly mortgage bills jumped by £500 to £1,800 – an increase of nearly 40pc.
Chris Sykes, of mortgage broker Private Finance, said one client applying for a “let-to-buy” mortgage found their property was valued at £100,000 less than they paid for it. They had bought their two-bedroom south London flat for £460,000 three years ago and were planning to rent out the property to raise money to buy a new home. But two lender valuations put the value of the flat at £360,000.
City centre landlords have been worst hit by rent falls. According to rental website SpareRoom, between October and December rental values in London’s EC postcode (which includes the City of London) were down 19pc compared with the same period in 2019.
Mark Harris, of broker SPF Private Clients, said: “There has been downward pressure on flats. The pandemic means proximity to workplaces and transport links are less important.”
It’s not just in London: Aaron Strutt, of Trinity Financial, a mortgage broker, said a landlord who tried to remortgage in Essex found the property was down- valued from £ 172,000 to £ 142,000, down 17pc. “The valuation came down because the rental income was not as strong as the lender wanted,” Mr Strutt said. “Clearly, flats have been hit by the pandemic.”
Angus Stewart, of Property Master, an online buy-to-let mortgage broker, said that the lower valuations put on properties by their existing lenders may force landlords to sell up.