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Lenders `damaging newbuild sales`

Overcautious lenders are damaging the recovery of the property market, according to the Home Builders Federation.

This is particularly the case with newbuilds, because lender valuations are usually based on the recent sale prices of three comparable properties.

But because there may be few such properties on a new development - owing to the low volume of transactions due to the recession - lenders are playing safe and undervaluing.

This leads to lower mortgage offers that do not match asking prices, which causes sales to fall through.

A federation spokesman said: “There is an issue with valuations and it’s a concern to the industry. We are trying to work with the lenders, their representatives and also with the Government to find ways to improve the situation.”

He is supported by housebuilders Barratt and Redrow, which have warned that mortgage valuations continue to be a major stumbling block in sales.

Estate agents estimate that one in seven properties are being valued at below their sale prices, despite buyers negotiating significant discounts.