Apr 28, 2010
Worry over 'stretch' valuations
I TRIED to buy an apartment recently and was surprised when the bank loans officer advised me that his valuer could value property at whatever price I needed to secure a larger loan.
The property was valued at $510,000 in November last year and after checking with several banks, the present indicative value was between $530,000 and $540,0000.
So just last week, the property agent, together with her banker and the banker's valuer, assured me that the property's indicative valuation of $600,000 could be matched without any problem.
When I questioned the fact that the value had jumped so much and whether it would be a risk, I was advised by the loans officer that loans of under $1 million were rarely scrutinised and with an uptrending market, such 'stretch' valuations would easily be approved.
In fact, the agent's response was that the valuation was not important; it was purely the buyer's willingness to match the seller's price and that it was better to buy now before prices rose even higher.
Shouldn't the valuation of a property be an independent function to ensure that property prices are supportable? And if the banks and valuers are feeding a buying frenzy, where is the control mechanism to prevent a property bubble from developing?
Kang Wey-Ming
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