How a new build is valued
For a home that isn't built yet, the valuer values it as if complete, using the plans, specifications and the land, and compares it with recent sales of similar homes nearby. For a completed new home, they value it as it stands. Either way, the lender lends a share of the lower of the price and the valuation.
Why new builds value low
- The price includes things buyers value but valuers don't fully count: marketing and display costs, developer margin, incentives built into the price, and premium inclusions.
- Few comparable sales. In new estates there may be little sales evidence yet, so valuers lean conservative.
- Rebates and incentives. If a builder offers a cash rebate or 'free' upgrades, the valuer may treat the true price as lower.
- Time. On off the plan purchases the valuation happens near completion, sometimes years after you signed, and the market may have moved.
What a low valuation means for you
If the valuation is below the price, the loan is calculated on the valuation, so the shortfall has to come from your own funds. It can also push your loan above 80% of the value, which can mean lenders mortgage insurance (unless you are using the 5% Deposit Scheme).
| If it valued at the price | If it values $40,000 lower | |
|---|---|---|
| Value used by the lender | $800,000 | $760,000 |
| Loan at 80% of that value | $640,000 | $608,000 |
| Cash you need for the price | $160,000 | $192,000 |
What you can do
- Before you sign: have the price sense checked against recent sales nearby, and keep some cash in reserve for a possible shortfall.
- Make the contract subject to finance where you can, so a low valuation doesn't lock you into a purchase you can't fund.
- Ask for a review if the valuer missed comparable sales or features; your broker can request it with evidence.
- Consider a different lender. Lenders use different valuation panels and policies, and a broker can often get a second opinion before you are committed.
Sources
General information only, not credit advice. It doesn’t take your objectives, financial situation or needs into account. Rules and figures change; check them, or talk to Joshua, before you rely on them.