House valuation - reality check

[FromageFraisOff]

Had house valued today. SE London zone 5. Terrace. Bought in 2015 for 410k. It was a wreck. We have done a back to brick renovation - structural work, changed layout, all new windows, doors, new electrics, new boiler and central heating. Replaster. Redecorate. Repaired roof. New bathroom - had to reduce third bed by 30cm so it's now just 290cm by 220cm. New patio. Damp proofing. Kitchen was new in 2015 but is basic. Renovations have probably cost 55k.

Valuation given was is 500k.

Different agent had valued it at 575k in mid 2022.

Our neighbour opposite (semi. Not extra rooms then ours but 10 sqm bigger) has just accepted 670k. Our next door neighbour sold for 600k in 2022. So we had expected 550k- 575k. Now thinking that was naive!

EA said we'd just need to cut our losses if our priority is to move (we need more space and reckon that'll become more pressing within the year) and we should just see how much more we could borrow.

Just feeling a bit gutted. Has the market really dropped this much?

Well it’s entirely up to you what you want to market it at. But we all know house prices have taken a downturn in the last year, so the 2022 valuation will likely be higher than what you’d get now. That 3rd bedroom is very small, and I’m still amazed at the price difference between houses here (manchester) and London!
you’ll still make a profit even if it sells at £500k

Interest rates have gone up since 2022. May 2022 we got a mortgage for 2.1% now they’re more than double so it’s not really comparable.

A lot of areas in and around London have dropped by around 10% from summer 2022. You should get three different agents out though.

What do the other agents say? I would talk to 2 or 3 not just one.

Why was your neighbours so much more expensive?

We are not London, but our house was valued last year at less than it was valued 8 years ago.

Surprised that a tiny three bed terrace goes for >450k in zone 5....

Where are you hoping to move to? Won't prices there be similarly affected?

You may not have made anything but equally you won't be paying so much for the next move.

How many EAs have you seen? I would be aiming for 5-7 valuations in order to choose an agent

If you really want to know it's current market value pay for a RICS valuation. It's not that expensive and will give you a much more accurate assessment. Usually though - agents value more optimistically than chartered surveyors. The RICS valuation though will give you a better indication of how a bank will value it if the purchaser is going to require a mortgage.
Alternatively, as others point out, get more agents in for free valuations. Your not short of them in that area.

Definitely more valuations!

It could be hybrid working/WFH reducing demand?

People tend to go to zones 5/6 for cheaper housing but still want to be in the London fare zone. If you no longer need to go in to the office much (or at all!), you can go further out and get more for you money - which I assume of perhaps what you are doing!

Thanks for all your replies.

House is 90 sqm. Has decent sized garden. 10 mins from station and we are 30 mins into London.

Reason EA gave for opposite neighbours house being more expensive is - it's a semi and 10 sq metres bigger. I guess I am surprised that equates to 160k. And next door neighbours (600k sale) sold when the market was better.

Interesting point re RICs valuation. We remortgaged in late 2022. House was valued at 620k. Appreciate things have changed since then.

We plan to stay in our area just need another bedroom and want some more outside space. This type of house doesn't seem to be listing to reflect the drop. But also they are not selling. Agree that if they'd dropped by 10-15pc then we'd be in a better position.

Yes we will get some more valuations. Might leave it a while though. I probably need a thicker skin before starting this process!

I always think it’s surprising how much extra you have to pay just for moving from a terraced to a semi detached house or from a semi to detached house. Or how much extra you pay for one extra bedroom.

There is a ceiling price to all properties. No matter how much you do it isn't realistic for them to go above a certain limit. You have to take into account you have lived there for 9 years, so assuming your mortgage payment would be less than the market rent rate then consider this as well.

Have you considered converting the loft, if it has not already been done? I know of some friends with smaller floorplan terraced houses who managed to get the head height in the loft by dropping the ceiling heights in the bedrooms in the floor below (there were very high ceiling heights originally), and another friend who managed to convert the loft and get head height by raising the pitch of the roof (because of the location of the house, and what it was next to, this got planning permission). Sometimes it can be cheaper to get an extra bedroom this way, than buying a bigger house for and extra £150k (at least, if not more in London), with stamp duty etc on top of that.

This. If house prices go down they tend to go down across the board.

Definitely get more valuations from a range of agents! I got 4-5 valuations and there was a 20% + difference between the top and bottom.

Knowing what the market was doing (stagnant/dropping) made me very nervous to go with a higher one but I did and sold within 3 weeks.

The fact you have renovated to that extent may make your house more appealing than the first agent realised. I’d be surprised if a 10 square metre difference would equate to that much difference with your neighbour.