Doesn't pay to be swayed
VALUERS are coming under intense pressure from developers and mortgage brokers to justify their property valuations as conditions continue to deteriorate in Melbourne's new home and off-the-plan apartment market.
One prominent industry figure has warned that valuers won't be pushed to "sell their integrity" as a growing number of sale settlements are threatened by falling property values, developer incentives and tighter funding restrictions.
"What it comes down to is the valuer has regard to the evidence and that opinion is not there to be manipulated by either side by the circumstances associated with the deal," said Brad Papworth, spokesman for the Australian Property Institute and director of analyst group Charter Keck Cramer.
Mr Papworth said that regardless of "pressures in the market", the way valuers worked would not change to "appease the wishes of a few".
The comments were sparked by a series of recent media stories about buying incentives and their potentially distorting effects on property values in the new home and off-the-plan apartment markets.
Some developers and mortgage brokers complain that valuations are proving far too conservative and were unnecessarily causing financing and settlement problems, particularly for first home buyers.
Since the onset of Melbourne's property slump in 2010, developers have been offering buyers big cash incentives, price discounts, and gifts such as whitegood packs, furniture, cars and holidays in a bid to close deals in a time of weak demand and rising supply.
These incentives are sometimes declared in the contract of sale, but it has become increasingly common for the sweeteners to be detailed in a separate agreement that is not seen by a valuer.
Industry sources say the practice has become so pervasive that it is affecting the ability of buyers to get financing, especially at a time when values are also falling between the time a contract is signed and settlement takes place. "Valuers are seen as influencing the market when really what we are doing is sticking by our integrity to assess fair market value, and the sales that are occurring aren't necessarily occurring at fair market value," Mr Papworth said.
But industry group the Urban Development Institute of Australia argues that incentives are a valid technique for attracting buyers.
"The value of any property at any given time is determined by what the person who is buying is prepared to pay," said Tony De Domenico, UDIA's executive director.
Australand and Villawood Properties have called for an end to incentives.