Are banks deliberately driving the Gold Coast Property Market down? By Jamie McIntyre
Are banks deliberately driving the Gold Coast Property Market down? by Jamie McIntyre
Allegations are being made that banks are pressuring valuers to value Queensland Properties up to 30% below their true value.
The rumours and allegations were also reported recently in the Financial Review.
Agents and buyers are complaining that many property contracts are falling through because valuations are coming in at 15 to 30% below sale price, meaning banks refuse to lend on the contract price.
If true, banks are clearly doing so to limit their exposure however ironically these actions would in hindsight be increasing their exposure and risk, by driving the falling Gold Coast property market down further.
But the concern is that the situation is spreading to other states, where properties are being undervalued causing sales to fall over, which should concern overly leveraged homeowners.
The European crisis is clearly concerning Australian banks.
Many Gold Coast property owners in the last year have received what is effectively a margin call.
Many Australians are unaware banks can ask you at any time to top up your home loan or force you to sell.
The banks are revaluing Gold Coast Mansions.
Due to valuers being under alleged bank pressure to value below market value means home owners are being asked to top up money to avoid being forced to sell, just like a margin call on shares. With market value at the top end already being 30 – 35% below 2007 prices, this presents a real issue for property owners.
This has only caused the Gold Coast market to be driven even lower at the top end.
So much so there are $5million mansions changing hands for closer to $2million.
Sovereign Island is home to arguably the worst property market in Australia, with some prices having dropped 60% from their peak.
If anyone wants a mansion on the Gold Coast for half price or less, now is the time to buy as I believe over the next 6 months you will be seeing the bottom of the Gold Coast market.
Even Gold Coast apartments such as Oracle are available at up to 50% discounts however generally Gold Coast high rises are some of the worst investments in Australia due to the fact there is so many, and the Body Corporate fees which mean you never really own the property.
Overall though I see the Australian Property Market strengthening and offering steady growth due to the 640,000 housing shortage predicted in Australia by 2030.
This will keep a floor under Australian real estate and in some areas cause more price explosions in the future, particularly key regional cities.
However banks or valuers tactics to value properties below their real value is concerning and is a habit that needs to be stopped.
After all the true value of property is what someone is willing to pay for it.
And thus valuers valuing properties 15 to 30% below sale prices simply means they are wrong.
The question is are they inadvertently wrong or being pressured to do so?
One can argue they can’t be inadvertently wrong as valuers get a copy of the sales contract to know what the market price is thus it would suggest valuers are simply choosing to incorrectly value property to protect themselves from being sued by the banks or the banks indeed are pressuring valuers to drop values to serve the banks agendas.
It’s been said that banks are only concerned about your interests;
That’s the interest that you pay to the banks.
Jamie McIntyre.
Jamie McIntyre is a corporate authorised representative (ASIC No: 321315 ) of CLEARING AND SETTLEMENT SERVICES LTD (AFSL 238796)
A very interesting insight. We often forget how true your final statement is!
I had already been wondering whether this sort of thing had been going on for a while, at least out in regional Victoria. Horsham way and further west, valuations have often been ridiculously conservative for nearly 2 years now, which have already led to sales not being able to go through. Are banks making things difficult because they want to condition people into getting used to the idea of 60 to 70% LVR, so that this will become more the norm in future making mortgages almost fail proof for banks?
What!!! This article is stupid! Banks don’t do that, and they aren’t Doing that, and If you actually knew and spoke to Valuers and worked in the industry you’d know that they were doing their best in very difficult circumstances. Our Val’s in Gc are all stacking up. Perhaps my friend the case is simply that the properties in question you note, mainly mansions and resorts, were at massively inflated artificial prices to begin with, and this is a correction of te market.
Jamie, read with interest your article re banks undervaluing property on the GC. We believe you are right! Banks and valuers are looking in the rear view mirror and not looking at the true values. How can a property in the first instance be valued less than replacement value?? They use as part of their criteria recent sales in the area, but don’t take into account the reasons for those sales, some perhaps sold under stress from the banks! The bank is happy to lend at their valuation at time of purchase but when it comes to times like we are experiencing at the moment, suddenly the values have dropped and the banks exert pressure on home owners, which is as you state, basically a margin call. We bought a property on Ephraim Island for $2.55m June 2007, now the bank has valued it at $1.1M, $600,000 below replacement cost and not taking into account land value! How can this be??
I thought mortgage insurance which either the consumer or the bank take out covered the loan. Maybe it is the Mortgage Insurers which there are only 2-3 in Australia are the ones dictating values. SE Qld does seem to be having a bit more activity this year than 2011 with prices down to a level that make it more attractive.