Valuations turn cautious
'What is the value of your flat?' An innocent enough question that in normal circumstances produces an answer that buyers, sellers, and lenders will broadly agree with when a deal is to be done.
But these are hardly normal circumstances and valuations may now be wildly different depending on your role in the deal.
Derek Hinden, a property investor, found to his dismay this month that two of his flats each had lost millions of dollars in their bank valuation when he checked updated online property prices provided by HSBC.
While no transactions had taken place in the building to support the online valuation, the bank had nonetheless deeply cut back the value it placed on the flats when he bought them just three months ago, he said. 'In all cases that I checked, the bank's valuations were significantly lower than the most recent sale prices in the second-hand market.'
For example, Mr Hinden said he bought his unit at Winfield Building in Happy Valley for HK$16 million on July 14 this year. On October 12, HSBC's online bank valuation of the unit was HK$17.85 million, but by November 3 the value was revised down 20.84 per cent to HK$14.13 million.
According to centadata.com, which provides the latest transaction records, the last registered deal done at Winfield Building for a similar-sized unit was for HK$21 million on July 23.
Mr Hinden said the online property valuation did not reflect the true market value and complained that this practice by banks could be responsible for the 'panic selling' he believed was taking place.
HSBC said online property valuation on its public website was based on data from an independent valuation agency, adding that the price quotes were only indicative.
'Statistics in the public domain - that is, recorded transactions from the Land Registry - have also shown that property prices have been adjusting downwards' since the middle of September, the bank said when asked for comment.
Banks' online property valuation systems allow clients to input the addresses of the properties that they would like to check for current market values and provide instant answers.
David Cheung Wang-ip, executive director at Vigers Appraisal and Consulting, warned that the resulting valuations were for general reference only. 'It is not the final valuation of a property. Banks will do further valuation exercises before granting mortgage loans to buyers.'
Vigers provides property valuation services to various banks including Bank of China (Hong Kong) and Standard Chartered Bank. Mr Cheung said a property valuer would look at transaction records in neighbouring projects if no deals had been done in a building it was assessing.
Prospective sellers or buyers should tell banks about their particular property and they would then get a more up-to-date valuation, he said.
Cookie Wong Wing-yan, associate director of Ricacorp Mortgage Agency, said overall property prices had fallen 10 to 20 per cent since Lehman Brothers's collapse in September.