The Cost Of Valuations Likely To Rise
Tuesday 7 October 2003
THE COST OF VALUATIONS LIKELY TO RISE SAYS PROPERTY INSTITUTE
The New Zealand Property Institute said today that the cost of getting a valuation is likely to rise.
CEO, Conor English said today, "While there has been a lot of media coverage on rising property prices recently, there has been less of a focus on the rising cost of indemnity insurance. This is a significant input cost for property professionals, particularly Valuers".
"Indemnity Insurance costs have been rising significantly since September 11, and as insurance companies have sought to rebuild their balance sheets that were damaged by the falling international stock markets. This has seen insurance premium increases, in some cases of several hundred percent over the last two years, along with excesses increasing and more exclusions from coverage being brought in".
"For example individual valuers who paid say $5000 two years ago are now being asked to pay over $15000, with an increased excess. Larger property organisations are seeing their cost increase massively as well, in one case for example, from $36,000 to over $250,000".
"Current fees of about $400 for residential valuations will not be sustainable with these increased costs. Those who are buying a house can expect the cost of a residential valuation to rise accordingly to recover these increased costs".
"Relative to the increased cost of buying a house over the last two years this $400 - $500 is insignificant and money well spent".
Other valuations services would also be affected Mr English said. "Rural, industrial, retail and commercial property sectors have all seen significant gains in value and sales. Unlike real estate sale commissions, valuations are not charged on a percentage commission of sale price, as they are independent. Valuers therefore need to increase their base fees to recover the massive increases in indemnity insurance costs".
"Unfortunately there are no free lunches. If property professionals are to continue to protect the interests of their clients and maintain viable practices, they must continue to maintain adequate indemnity insurance cover," Mr English concluded.